Exclusive: Europe plans major scaling back of financial trading tax

Thu May 30, 2013 6:56pm EDT
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By John O'Donnell and Ilona Wissenbach

BRUSSELS (Reuters) - European countries planning a tax on financial transactions are set to drastically scale back the levy, cutting the charge by as much as 90 percent and delaying its full roll-out for years, in what would be a major victory for banks.

Such sweeping changes would blunt the impact of the tax, pushed for by German Chancellor Angela Merkel and popular with voters who blame bankers for the financial crisis.

The revisions have yet to be formally proposed but were revealed to Reuters by officials working on the project.

Banks have lobbied furiously against the tax, due to be levied by Germany, France and nine other European states. It has also hit legal challenges from Britain, which will not join the tax but fears being forced to collect it on behalf of other EU states, driving business from London's financial center.

Under the latest model, the standard rate for trading bonds and shares could drop to just 0.01 percent of the value of a deal, from 0.1 percent in an original blueprint drafted by Brussels. That would raise only about 3.5 billion euros, rather than the 35 billion initially forecast, a senior official said.

The tax may now also be introduced more gradually: rather than applying to trades in stocks, bonds and some derivatives from 2014, it may apply next year only to shares. Bond trades would not be taxed for two years and derivatives even later.

The roll-out could be scrapped altogether if, for example, the tax pushed traders to move deals abroad to avoid paying it.

Proponents of the tax said such changes would render it toothless.   Continued...

A Businessman is silhouetted as he stands under the Arche de la Defense, in the financial district west of Paris, November 20, 2012. REUTERS/Christian Hartmann