EU Sees $23.5 Billion in Revenue From Financial-Transaction Tax

(Bloomberg) -- A proposed tax on financial transactions in 10 European Union countries could generate about 19.6 billion euros ($23.5 billion) of annual revenue, though Brexit could make collection more difficult, according to a new estimate.

Derivatives account for more than half of the projected revenue, with 6.2 billion euros coming from exchange-traded contracts and 6.1 billion euros from over-the-counter trades, according to documents prepared for a meeting this week of officials from the 10 countries. Those figures are based on a tax rate of 0.01 percent for derivatives. At half that rate, total revenue would dip to 16.6 billion euros, according to the documents seen by Bloomberg.

Those totals assume that the tax could be collected abroad, including in the U.K. after Brexit, on transactions involving a counterparty from one of the participating countries. Talks on the financial-transaction tax were put on hold last September to allow experts to work through the possible consequences of the withdrawal of Britain, home to the EU’s main financial hub, from the bloc.

The European Commission, the EU’s executive arm, proposed the tax in 2011 to make sure the industry made a “fair contribution” after taxpayers bore the costs of the financial crisis. When some member states opposed the levy, a smaller group sought a compromise under “enhanced cooperation” rules. Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain are still at the table.

When the tax was first floated for the entire EU, the commission projected annual revenue of about 57 billion euros.

Euro-area finance ministers meet in Brussels next week, and the financial-transaction tax may be discussed on the sidelines.

In the case of a so-called hard Brexit, whereby the U.K. quits the EU without a trade deal or bridge arrangements in place, the 10 countries pursuing the tax potentially face a “more tricky enforcement issue.”

©2018 Bloomberg L.P.