21. The majority of Member States have been holding discussions in recent years regarding the introduction of new taxes on the financial sector and the impact they would have on pensions. They recognise that creating additional taxes on the financial sector could be a path to alleviating the problems they now face in relation to pensions and the lack of funds available to run them. However, the reason for such debate relates to the role that the banks and other financial service institutions played in the causes of the crises as well as the current government support offered to the financial sector. There is also a general perception that, as financial activities are generally exempt from VAT, the financial sector is under–taxed currently.
One potential new tax rule being considered is that which would introduce a tax on as broad a range of financial transactions as possible. This could include bonds, shares and derivatives as a starting point. Almost all financial institutions would be liable but there would be exemptions for some day to day activities such as mortgages and payment services. An impact assessment of the likely revenue this tax could generate was close to 6 billion Euros per year.
That said though, as the tax revenue would be collected on the basis of the principle of residence of the financial institute, one has to consider the possibility that a bank based in the area which is liable could transfer its transactions to a subsidiary outside of the relevant jurisdiction.
Q. One of the criteria that would impact whether a financial institution would be liable for the new tax is the geographical area in which it conducts its transactions.