The European Commission this week announced plans to compel the financial sector to make a “fair contribution” to public finances via a tax on transactions of financial instruments.

Under the proposal, the exchange of shares and bonds would be taxed at a rate of 0.1%, and derivative contracts at a rate of 0.01%.

In an announcement, the commission said the tax could raise approximately €57bn every year, and would come into effect from 1 January 2014.

Responding to the announcement, the general secretary of UK’s Trade Union Congress Brendan Barber welcomed what the union group called a “Robin Hood” tax.

“This is a major step forward and I urge the British government to support it. An FTT [financial transactions tax] would provide much needed revenue for tackling climate change, global poverty and cutting public sector deficits.

“It would also help rebalance the economy, address the under-taxing of the financial sector, and reward long-term investment,” Barber said.

However, the Investment Management Association was not as pleased with the proposal.

In a statement, IMA director Julie Patterson welcomed clarification on the objectives of the tax, and agreed with the commission’s statements that if such a tax is introduced it is important to avoid distortions and to create incentives for the financial sector to make long-term investments.

“However, we are very concerned that the specific proposals will not achieve this.

“Pension funds could be hit twice by this tax: when the fund manager arranges a transaction on behalf of the fund and when the fund acquires or sells that asset. Ucits investors could be hit three times, as they may also be taxed when they buy units in the fund. As proposed, this would be a tax on savers, not banks.

Patterson added that the tax will create distortions in the retail marketplace, and insurance-based products will not be caught as they are not strictly ‘financial instruments’.

“In the UK, the specific and additional stamp duty charged on funds has been a major factor in funds being domiciled outside the UK. Any tax on financial transactions is highly likely to create distortions between Europe and other key financial centres, which can only result in a loss of business for the EU. We urge the commission to work closely with all sectors of the industry and investor bodies as these proposals are developed.”

Regulation partner at law firm Osborne Clarke David Blair said that given the “lack of transparency” around EU budgets, it was “questionable” whether the commission is an appropriate body to be redistributing wealth to European tax payers.

“In the event that such taxes were in fact devoted to, say, bolstering EU institutional expansion or the preservation of the euro, taxpayers may feel that the EU commission's homage to Robin Hood lacks romantic substance. Businesses and their employees will doubtless find it ironic that an institution that poses such a considerable indirect burden on taxpayers should find the moral authority to impose an additional levy on wealth creation in the name of taxpayer protection,” Blair said.

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