THE EUROPEAN Parliament has given its overwhelming backing to a “Robin Hood” tax on financial transactions which, it said, could lead to banks paying as much as €200 billion a year in reparations for damage they have caused to the European economy.
While the declaration of support for what is commonly known as the Tobin Tax – after James Tobin, the US economist who developed the theory in the 1970s – is non-binding, it will put pressure on the European Commission to draft legislation hitting the banking sector hard.
The parliament backed the proposals by 529 to 127 votes.
“We want to send out an institutional signal saying that the private sector bears its part of the responsibility for the crisis,” MEP Martin Schulz who heads the parliament’s Socialist bloc, said.
The resolution calls on the EU to support the introduction of a global transaction tax but, “failing that, [it] should implement a financial transaction tax at the European level as a first step,” it says.
The plenary session of the parliament in Strasbourg heard that the next step should see the commission produce a feasibility study and concrete legislative proposals.
The resolution said a tax on transactions including derivatives would target speculators and reduce public deficits. It estimated that a 0.05 per cent tax would generate €200 billion a year in the EU alone and over three times that if it was introduced at a global level.
The resolution was drafted by Greek Socialist Anni Podimata, who pointed out that it was the second time parliament had called for the introduction of a transaction tax. She called on the commission to now act.
“Citizens have been hit hard by the financial crisis and face growing unemployment,” she said. “At the same time, the financial sector remains largely under-taxed and has this year enjoyed profits and bonuses at pre-crisis levels.”
France and Germany have pushed for a global transaction tax at G20 summits in recent years but have faced stiff opposition from the US and Canada.
The resolution also calls for the introduction of eurobonds as a tool for the management of debt across the EU and wants more measures to be introduced aimed at reducing tax evasion and fraud.
In addition to calling for a global lottery to help raise funds to combat world hunger, the tax and development proposals want multinationals to be banned from “transferring their profits to countries with the most favourable tax regimes” and says they should pay taxes in the countries where they generate the profits.
MEP’s have also backed an effective ban on “naked short-selling” of securities. The practice, which sees speculators bet on a fall rather than a rise in the price of a security to make a profit, and “credit default swaps”, essentially to insure against a state defaulting on its debt obligations, were heavily implicated in Europe’s recent sovereign debt crises.
A draft law which will prohibit the trade in credit default swaps related to sovereign debt unless an investor has a long position in the debt or equivalent assets was backed by 34 to eight vote.
