Since the financial crisis, there has been frequent talk of the introduction of a financial transaction tax. This tax, often referred to as “Tobin tax” after its original advocator, James Tobin, in the 1970s, would impose a levy on individual transactions undertaken by a financial institution. The subject has been discussed at G20 summits since Pittsburgh in 2009, and the European Commission (the “Commission”) has made no secret of its desire to implement the taxation across its 27 Member States.

On Wednesday 28 September in the annual State of the Union address, José Manuel Barroso, President of the Commission, announced the long anticipated proposal for a European financial transaction tax. The tax, if implemented, would impact financial transactions between financial institutions from 2014, charging 0.1% against the exchange of shares and bonds and 0.01% across derivative contracts. The Commission believes the tax, with the potential to raise 57 billion euros per year, would “ensure that the financial sector makes a fair contribution at a time of financial consolidation” noting, among other things, the significant government bailouts to support the financial sector during the crisis.