By Simon Miller
The European Parliament has voted overwhelmingly in favour of a Tobin tax.
The parliament voted in favour of a financial transaction tax by 487 votes to 152 with 46 abstentions.
According to the adopted 'opinion' , the FTT "should be better designed to capture more traders and make evasion unprofitable and adde that the tax should go ahead even if only some Member States opt for it".
Parliament backed the tax rates proposed by the Commission (0.1% for shares and bonds and 0.01% for derivatives) but with pension funds being the only sector exempted from the tax.
Parliament has been calling for a financial transaction tax (FTT), for close to two years and the commission tabled a legislative proposal for one late in 2011.
Rapporteur Anni Podimata (S&D, EL) during the debate said, "The FTT is an integral part of an exit from crisis. It will bring a fairer distribution of the weight of the crisis. This FTT will not lead to relocation outside the EU because the cost of this is higher than paying the tax.".
The adopted text added to the Commission proposal an "issuance principle", whereby financial institutions located outside the EU would also be obliged to pay the FTT if they traded securities originally issued within the EU.
For example, Siemens shares, originally issued in Germany and traded between a Hong Kong institution and one in the US would have to pay the tax. Under the Commission's proposals, such transactions would have escaped the tax, because only financial institutions based within the FTT zone would be subject to it.
The "residence principle" proposed by the Commission was also kept, which would mean that shares issued outside of the EU but subsequently traded by at least one institution established within the EU would be caught.
The resolution also raised the stakes to make evading the FTT potentially far more expensive than paying it.
Citing the UK stamp duty approach, the parliament linked payment of the FTT to the acquisition of legal ownership rights. This means that if the buyer of a security did not pay the FTT, he or she would not be legally certain of owning that security. As FTT rates would be low, this risk is expected to far outweigh any potential financial gain from evasion.
The opinion added that if it was not possible to establish the tax throughout the EU at the outset, enhanced cooperation should be envisaged.
However, in a move that will set it on a crash course with the UK, the resolution added that it was also "recognised that introducing the tax in a very limited number of Member States could lead to the single market being undermined and that measures should therefore be taken to prevent this".
In a direct dig at the UK, Podimata added "With the EU having the largest financial market, it is up to us to make the first step. We cannot be held hostage by a handful of Member States."
Various exemptions were requested by a number of MEPs. In the end the most substantive exemption was that granted to pension funds, which would see the tax waived on their transactions.
The opinion maintains the Commission proposal timetable: 31 December 2013 deadline for Member States to adopt implementing laws and 31 December 2014 for entry into force of these laws.