THE FINANCIAL TRANSACTION tax could significantly reduce the level of contributions member states are required to make to the EU budget, the European Commission has said.

The controversial tax (FTT) could reduce Ireland’s contribution to the EU budget in 2020 by 50 per cent – or €534 million – according to the estimates.

The Commission says that every euro levied with the tax would ultimately benefit member states as, under its proposals, two thirds of the revenues of the FTT would go to the EU budget. “Therefore, every euro levied with the FTT will ultimately benefit the member states, whether through direct revenue collection or through a reduction of contributions to the EU budget,” it said in a statement.

“The financial sector does not pay VAT and has received massive support by taxpayer’s money,” said Financial Programming and Budget Commissioner Janusz Lewandowski. “Taxing the transactions of all financial institutions at rates as low as 0.01 per cent is only fair. Furthermore, the estimated revenue which the tax would generate by 2020 can only be welcome by cash strapped governments across the EU.”

The European Commission calculated the figures using data for 2010, which estimates that the FTT would raise €57 billion.

It said that, assuming that the volume of taxable transaction will follow the evolution of the EU Gross National Income (GNI), that €57 billion would become €81 billion in 2020. The Commission suggested that two thirds of that €81 billion be used to finance EU expenditure, which amounts to €54.2 billion.

Based on the Commission’s proposal, the GNI national contributions would be €110 billion in 2020 without an FTT, and so with an FTT member states could therefore save 50 per cent of their GNI contribution for the EU budget.

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