Tobin tax is likely, says banking chief

THE UK is likely to adopt a tax on all financial transaction following pressure from the European Commission, the head of the British Bankers' Association (BBA) has said.

BBA chief executive Angela Knight told a conference at the Saïd Business School in Oxford she expects the EU to adopt the tax, which will impose an 0.1% charge on transactions involving EU financial institutions. "If I had to make a bet, I would bet that the FTT will be adopted," she said.

The EC last week issued a directive on the tax, popularly referred to as the Tobin Tax. The UK has said that it will resist any attempts to introduce the tax on a non-global scale.

Manfred Bergmann, the director for indirect taxation and tax administration at the European Commission, told delegates that the EC was determined to push ahead with the proposals.

Efforts at imposing a levy on the financial sector at a national level would not be effective, Bergmann said. "But EC efforts will be more than the sum of its parts," he said.

The tax would not particularly affect the City of London but would clamp down on high frequency traders that offer little to the wider economy, Bergmann said. These traders partake in a number of small transactions with little marginal profit. The tax would simply encourage fewer transactions at a higher profit margin, he said.

Bergmann said he hoped the tax would raise 55bn Euros a year. It was not yet decided how the revenue would be shared out, he added.