(Photo: Reuters)
(Photo: Reuters)

European Union finance ministers have paved the way for 11 eurozone countries to design a financial transactions tax that aims to discourage speculative trading and bolster public finances.

France and Germany will be among the list of countries that could apply the new tax laws to stock, bond and derivatives trades. The plan is similar in style to a so-called 'Tobin Tax', named after the economist James Tobin who originally conceived the idea in 1972 to apply to currency trading. Other adoptees to the proposal include Italy, Spain, Austria, Portugal, Belgium, Estonia, Greece, Slovakia and Slovenia.

If successful, the new plans could be adopted by 1 January 2014.

"It is a milestone for EU tax policy, as it paves the way for more ambitious Member States to progress on a tax file, even when unanimity could not be achieved. Those who want to move ahead, and who appreciate the merits of working more closely on taxation at EU-level, can do so," said Algirdas Šemeta, the Commissioner responsible for Taxation and Customs Union, Audit and Anti-fraud at the European Commission.

"For the first time ever, the Financial Transaction Tax will be applied at regional level. A block representing around 2/3 of EU GDP will implement this fair tax together, answering the long-time calls of their citizens. And in doing so, they can pave the way for others to do the same," he added.

The EU believes that the plan will both "strengthen the Single Market" and make taxation "fairer, as the financial sector makes a proper contribution to public finances and the costs of the crisis".

It is expected that a stock or bond trade will receive a 0.1 percent tax rate, while a financial derivatives contract will receive a charge of 0.01 percent for every transaction.

Ireland's finance minister and current Ecofin president Michael Noonan said he would act as an "honest and impartial broker in the discussions" between member states designing the plan even as his country has declined to participate.

Šemeta also said in his statement that the decision allowed the EC to present the Action Plan on Tax Fraud and Evasion which the Commission adopted in December.

"You will remember that this consisted of over 30 measures to tackle evasion and avoidance, including a tougher EU stance against tax havens and measures to fight aggressive tax planning. I am delighted that the Irish Presidency has given high priority to making progress on this file," he says.

"Tackling tax evasion carries a double dividend. Not only can it help recapture some of the €1tn a year we are losing in public revenues, but it will ensure fairer taxation at individual, corporate, Member State and global level," Šemeta adds.

The UK has not adopted help design the new tax regime but it already charges its own 0.5 percent stamp duty on trading in shares.

Luxembourg, Cyprus, Czech Republic and the Netherlands also declined to help construct the new voluntary tax plan.

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