QuickTake Q&A: Europe’s Tax on Trading Gets a Stay of Execution

It’s a nightmare scenario for stock exchanges and traders: Voters enraged by austerity measures and banker bonuses provoke their elected leaders into imposing a tax on financial transactions, causing trading volumes to slump, markets in some securities to dry up and traders -- both humans and robots -- to lie idle. Which is why everyone who derives their livelihood from the business of trading will raise a toast if a group of European nations abandon their proposed financial-transaction tax (FTT). The 10 European Union members have pushed back their final decision on the tax to September.

In 2011, the European Commission proposed an EU-wide tax of 0.1 percent for stock and bond transactions and 0.01 percent for derivatives. In 2012, the U.K. and a few others prevented the FTT from applying across the EU, forcing the tax’s biggest fans -- France and Germany -- to press on with a levy that would only apply in 11 countries. Under EU rules, at least nine states must be on board for the tax plan to proceed. Estonia pulled out last year, leaving just 10 countries -- Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovenia, Slovakia and Spain -- still talking. They have still to agree on the right tax rates for different securities.