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Taxing the financial sector - 07/10/2010

A hand holding a pen pointing to a trading chart on an LCD screen © iStock/archives

Global and EU- level taxes on financial sector would help to fund international challenges such as development or climate change and fix the fallout from the global economic crisis.

The proposal consists of two types of taxes. The first – at the EU level – would be a financial activities tax on the EU’s financial sector, while the other is a global tax on financial transactions.

As banks and other financial services companies were a major cause of the crisis and received substantial government support over the last two years, the tax would be a way to make them pay their fair share of the cost of recovery.

The financial sector is also under-taxed compared to other segments of economy. For example, many banks are exempt from VAT and receive other preferential benefits. The revenues generated by the tax would ensure they make a fair contribution to public budgets.

Meanwhile, an international tax on financial trading would be another way of generating new revenues. These could be used to fund global policies like development aid or to fight climate change.

The commission will also carry out an assessment of the impact such a tax would have on the economy.

EU governments will consider both options before the next summit of the world’s 20 richest economies (G20) this November, where common EU position will be presented.

More on taxation in the EU

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