Colosimo, T. Christina

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Cleveland-Marshall College of Law

Cleveland State UniversityEngagedScholarship@CSUIn the Balance Law JournalsWinter 2012The European Commission Wants the FinancialSector to PayT. Christina ColosimoFollow this and additional works at: https://engagedscholarship.csuohio.edu/inthebalancePart of the International Trade Law CommonsHow does access to this work benefit you? Let us know!This Monthly Feature is brought to you for free and open access by the Law Journals at EngagedScholarship@CSU. It has been accepted for inclusion inIn the Balance by an authorized administrator of EngagedScholarship@CSU. For more information, please contact library.es@csuohio.edu.Recommended CitationColosimo, T. Christina, "The European Commission Wants the Financial Sector to Pay" (2012). In the Balance. 6.https://engagedscholarship.csuohio.edu/inthebalance/6   27 THE EUROPEAN COMMISSION WANTS THE FINANCIAL SECTOR TO PAY T. CHRISTINA COLOSIMO†  After the global economic crisis, the European Union’s (EU) economy has suffered one of the worst recessions since the 1930s.  The financial sector played a major role in the EU’s economic crisis starting in 2007 with a steady increase of failing banks.1  EU governments and citizens committed €4.6 billion in an effort to support and rescue the financial sector with taxpayer funded bailouts.2  The European Commission’s (Commission) response to the recession has been swift and proactive.  On September 28, 2011, the Commission announced a proposal for a financial transaction tax (FTT) for the 27 Member States as a resource for the EU’s budget.3 The Commission’s proposal for the FTT is available at http://ec.europa.eu/taxation_customs/resources/documents/taxation/other_taxes/financial_sector/com(2011)594_en.pdf.  The proposal requires unanimous support from the 27 Member States, and if approved by all, it would levy a tax on transactions involving financial instruments between institutions if at least one party is located in the EU.4  The tax rate for the exchange of shares and bonds is set at 0.1% and a rate of 0.01% on derivative contracts.5  The Commission has considered a financial transaction tax since the bailouts.  The financial sector’s contributing role in the financial crisis has piloted the proposal and will ensure that the financial sector contributes at a time of fiscal need.  The proposed FTT will raise revenue of €57 billion ($78 billion) in one year, and the tax will strengthen the EU single market.6  The FTT is also designed to create a disincentive for transactions that do not enhance the efficiency of the financial markets and will prevent a future crisis. European governments are split over the merits of the proposed financial transaction tax.  Some fear that the tax may drive business away from the EU,                                                           † Associate, THE GLOBAL BUSINESS LAW REVIEW. Profiles of all current staff are available online at www.globalbusinesslawreview.org. Originally published in November 2011.  1 See Economic Crisis in Europe: Causes, Consequences and Responses, EUROPEAN COMMISSION (July 2009), available at http://ec.europa.eu/economy_finance/publications/ publication15887_en.pdf.  2 Id.   3 Press Release, European Commission, Financial Transaction Tax: Making the Financial Sector Pay (Sept. 28, 2011), available at http://europa.eu/rapid/pressReleasesAction.do? reference=IP/11/1085&format=HTML&aged=0&language=en&guiLanguage=en [hereinafter Commission Press Release].  4 Rebecca Christie, EU proposes Financial Tax-to Start in 2014, BLOOMBERG NEWS (Sept. 28, 2011, 10:52 a.m.), http://www.businessweek.com/news/2011-09-28/eu-proposes-financial-transactions-tax-to-start-in-2014.html.  5 Id.   6 Commission Press Release, supra note 3.  28 IN THE BALANCE [Vol. 1:27  increase the cost of raising capital and damage member states' economies.7  The UK believes that the Commission needs to realign its focus on growth during the recession, rather then implementing a tax that will push the financial sector abroad to New York and Singapore.8  Financial Times Newspaper also reported that the proposal could shrink EU’s gross domestic product by 1.76 percent over time.9  The Commission reconvenes in November at the G20 meeting in Cannes, and it will offer more details on the proposal’s status.                                                              7 Transaction Tax Proposal Divides Eu States, DEUTCHE WELL-WORLD.DE (Sept. 9, 2011), http://www.dw-world.de/dw/article/0,,15424378,00.html.  8 See Commission Press Release, supra note 3.  See also Jamie Grierson and Geoff Meade, UK Opposes EU Transaction Tax, THE INDEPENDENT (Sept. 28, 2011), http://www. independent.co.uk/news/world/europe/uk-opposes-eu-financial-transaction-tax-2362227.html (stating that the UK government rejected similar proposals raised by its French and German counterparts in September 2010).  9 Id. 

The European Commission Wants the Financial Sector to Pay

https://engagedscholarship.csuohio.edu/cgi/viewcontent.cgi?article=1005&amp;context=inthebalance

The European Commission Wants the Financial Sector to Pay

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