A draft statement from the EU summit closing in Brussels today reveals that leaders have been discussing a financial transactions tax to compensate taxpayers for the burden they have borne in the crisis.
"The European Council [of EU leaders] emphasises the importance of renewing the economic and social contract between financial institutions and the society they serve and of ensuring that the public benefits in good times and is protected from risk," they said in a draft statement.
A 'windfall tax' on bonuses
France and Britain yesterday (10 December) committed to a tax on bonuses above 27,000 euros, but despite expectations, German Chancellor Angela Merkel said her country would not be following suit.
The British government said on Wednesday that banks operating in Britain would be charged a one-off 50% tax rate on employees' bonuses of above 25,000 pounds.
France's finance minister, Christine Lagarde, said President Nicolas Sarkozy plans to announce a windfall tax on banking bonuses on Friday "equivalent" to the 50% levy proposed by Britain.
EU wants IMF to endorse Tobin tax
At the request of the Pittsburgh G20 in September, the IMF is currently studying ways to limit the fallout of another crisis.
A financial transactions tax is just one of four elements under consideration. Other options under scrutiny are insurance fees, resolution funds and contingent capital arrangements.
The idea of a Tobin tax has been doing the rounds since its inception in 1971.
In Brussels it has gotten a regular mention at summits since the collapse of financial markets in 2008.
At an informal summit held in Brussels in September, EU leaders, in particular Germany's Merkel and France's Sarkozy, took a favourable position concerning an international Tobin tax (EurActiv 21/09/09).
After the summit, Sarkozy reportedly said leaders spoke freely and "without opposition" about implementing a Tobin tax.
Talking tax at the European Parliament
"If this crisis has a silver lining, then it is the increased support for using tax to raise revenues, especially a Tobin tax and curbing tax avoidance," Geoff Lloyd, senior adviser at the OECD's Centre for Tax Policy and Administration, told a hearing at the European Parliament on 2 December.
MEPs quizzed the OECD and the London Stock Exchange among others on the scope and purpose of such a tax (EurActiv 03/12/09).
They asked whether a Tobin tax would harm Europe if it only existed in the EU, what the tax revenues would be spent on and what kind of financial instruments would be covered.
The consensus among leaders and policymakers appears to be that a tax must be global if it is to be viable.
Jurisdictions falling outside the policy's remit would benefit as investors would divert business from taxed to untaxed jurisdictions, the argument goes.
US Treasury Secretary Timothy Geithner dampened enthusiasm towards the tax at the Pittsburgh G20 summit, saying the US would not support a financial transactions tax to contain investment risks.
