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The implementation of a financial transaction tax on all EU member states has been proposed by the European Commission to start in 2014.  The commission has stated that the tax would bring £50Bn a year into Europe and declared the reason for it would be to make sure that financial institutions make contributions during a period of fiscal unity in the eurozone as, they have a responsibility within the crisis and are not taxed as much as other divisions. It is intended that the extra revenue would be used to supply public costs.

Under the new legislation, any transactions between banks where at least one is base in the EU would be taxed at 0.1%.

However, in order for the tax to be imposed, the UK would have to agree to it also, yet a spokesperson for the UK treasury has stated that the UK will oppose any tax that is not launched worldwide. Officials from the City of London have calculated that approximately 80% of a tax imposed solely on Europe would be generated by London and therefore it would not be beneficial for the UK.

The announcement by the European Commission has been made ahead of the decision as to whether Greece is doing enough to reduce its deficit in order to qualify for the next instalment of its bailout fund totalling approximately 8Bn euros. Without these funds, there is a very high probability that Greece will default. However, addressing his annual state of union, Mr Barroso, president of the European Commission, strongly denied the rumours that Greece will be dismissed from the eurozone if it was to default on its debt.

Then again, there have been reports that eurozone members are divided in their opinion about whether Greece should receive further help should a strong need for it arise. A review of proposals that were submitted in July is currently being undertaken by eurozone members. The ideas submitted include increasing the eurozone bailout fund, reinforcing banks to make them less vulnerable to debt defaults and asking private lenders to write off a fifth of the debt owed to them by Greece.

As a result of this review, investors have been reassured that leaders in the eurozone are starting to make movements towards a definitive action plan to resolve the debt crisis, despite no measures being agreed upon as yet.

About The Author

Lee Murphy

MAAT and ICPA accountant, with a passion for making accountancy and bookkeeping accessible. Other interests include cloud-based software development for web and mobile access, keeping fit, reading, and entrepreneurship.

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