Financial Transaction Tax: Can it be Sufficient Resource of EU Budget when Introduced through Enhanced Cooperation?

Abstract

The discussion about the possible taxation of the financial sector has started in the European Union as a result of the financial crisis which has spread to the Europe from the United States in 2008. The EU Member States individually committed to support the financial sector for a total about EUR 4.6 trillion (i.e. 39% of EU-27 GDP in 2009). Those public interventions have significant budgetary consequences (strongly felt in Greece, Spain or Italy) and imposed a heavy burden on the present and future generations. Therefore there is a strong consensus not only on the level of the European Union but also internationally, that financial sector should contribute to the public finance more fairly. Moreover, with respect to the fact, that the crises was the result of complex interaction of market failures, global monetary and financial imbalances and weak supervision, it has been argued, that taxes could be used as regulatory tools. However, the imposition of FTT on financial sector is very sensitive issue. Due to this fact it will not be implemented through the directive (requiring the unanimity of all EU Member States) but rather through enhanced cooperation (i.e. only by countries willing to do that – by EU-11). The aim of the paper is to research, whether the revenues from the imposition of financial transaction tax through enhanced cooperation could be used as a new own resource of EU budget and whether it would enable to replace GNI contribution of EU-11 as announced by the European Commission.