Brussels: The European Union yesterday proposed a financial-transactions tax that would take effect in 2014 and raise about $78 billion (Dh286.45 billion) a year. The plan would set minimum tax rates for financial transactions throughout the 27-nation EU, the European Commission, the bloc's Brussels-based executive, said in a statement. Yesterday's proposal would apply a tax of 0.1 per cent on trading of stocks and bonds, with a 0.01 per cent rate for derivatives contracts. European governments are split over the merits of a transactions tax, with the British Treasury saying that such a levy would need to apply globally and "there are a number of practical issues that need to be worked through". EU tax proposals require unanimous support of the bloc's 27 members. The tax is aimed at banks, investment firms, insurance companies, pension funds, stockbrokers and hedge funds, among other types of financial firms, the EU said.   Spot foreign-exchange trades would not be covered by the tax, while currency derivative contracts are included. "The tax would aim at covering 85 per cent of the transactions that take place between financial institutions," according to the statement. The EU is seeking to insulate households and small businesses from the levy, and says banks could charge "not excessive" fees such as a €10 (Dh49.7) fee on a €10,000 stock purchase. The tax would "ensure that the financial sector makes a fair contribution at a time of fiscal consolidation," the commission said in the statement. EU member states will discuss the proposal before the commission presents the plan to the Group of 20 nations at a November summit. An impact assessment accompanying the proposal says that the plan would have a ‘long-run' negative impact of 0.5 per cent of gross domestic product. The tax would affect market behaviour and financial-industry business models, such as high-frequency and automated trading, the EU said. "It is time for the financial sector to make a contribution back to society," European Commission President Jose Barroso told the European Parliament in announcing the proposal in Strasbourg, France. Stephen Machin, managing director at Alvarez and Marsal Taxand UK, called the proposal ‘a populist measure' and said it "will put EU financial centres at a disadvantage" to competitors. "If this tax is introduced" in Britain, "then significant volumes of transaction activity will move" to other regions. British business secretary Vince Cable earlier yesterday said taxation is a "national competence issue" and EU proposals for a levy on financial transactions cannot be forced on Britain. gulf news