The European Commission has today presented a proposal which would see a tax on all transactions on financial instruments between financial institutions when at least one party to the transaction is located in the EU.

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.

The tax aims to ensure that the financial sector makes a “fair contribution” at a time of fiscal consolidation throughout the member states.

“The financial sector played a role in the origins of the economic crisis. Governments and European citizens at large have borne the cost of massive taxpayer-funded bailouts to support the financial sector. Furthermore, the sector is currently under-taxed by comparison to other sectors. The proposal would generate significant additional tax revenue from the financial sector to contribute to public finances,” the commission said.

Also, the commission said a coordinated framework at EU level would help strengthen the single market. At present 10 member states have a form of a financial transaction tax in place, so the proposal would introduce new minimum tax rates and harmonise different existing taxes on financial transactions in the EU.

Tax revenues would be shared between the EU and the member states. Part of the tax would be used as an “EU own” resource which would partly reduce national contributions.

Commissioner for taxation, customs, anti-fraud and audit Algirdas Šemeta said the proposal positions the European Union as a forerunner in the global implementation of a financial transaction tax.

“Our project is sound and workable. I have no doubt this tax can deliver what EU citizens expect; a fair contribution from the financial sector. I am confident that our partners in the G20 will see their interest in following this path,” Šemeta said.

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