By Simon Miller

A European-wide Tobin tax could leave a €116bn (£95bn) hole in the region's public finances, according to a report by accoutants Ernst & Young.

It disputed the European Commission's impact study of a financial transaction tax, which estimated that it could raise annual revenue of around €37bn, as "optimistic".

The report comes as President Nicolas Sarkozy and Chancellor Angela Merkel meet for another Franco-German summit in a bid to reassure markets that there are concrete rescue plans for the sovereign debt-troubled area.

Sarkozy is known to be keen to push on with a Tobin tax in his election year as he is already trailing in polls with French unemployment at its highest level in 12 years.

On the BBC's Andrew Marr programme yesterday, British Prime Minister David Cameron repeated his opposition to a Tobin tax but said if the French wanted to "go ahead with a transactions tax in their own country then they should be free to do so".

''We actually have stamp duty on share transactions in Britain and yet we have one of the most competitive and successful financial services markets anywhere.

''But the idea of a new European tax when you are not going to have that tax put in place in other places and so I will block it unless the rest of the world all agreed at the same time that we were all going to have some sort of tax," he told Marr.

The Commission said that it may push for a tax among a smaller group of members if the UK exercised its veto under "enhanced co-operation" procedure whcih requires a minimum of nine countries to agree.

The E&Y study claimed that when a decline in trading activity,
coupled with a fall in other tax revenues that would arise from lower economic growth would see a €116bn hole in the region's public finances, representing 1.2% of the €9.8trn in public tax revenues that the EU generated in 2010.

Marie Diron, economic advisor to E&Y, commented: "The Commission's figures in the impact study are not misleading they do clearly outline where they have made assumptions and what they have left out of the calculations, but the publicised €37bn revenue figure definitely masks the true effect of the tax on EU public finances."

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