The European Parliament has given its overwhelming support to a tax on financial transactions which, it said, could lead to banks paying as much as €200 billion a year in reparations for damage they have caused to the European economy.
While the declaration of support for what is commonly known as the Tobin Tax is non-binding, it will put pressure on the European Commission to draft legislation hitting the banking sector hard.
The parliament backed the proposals by 529 votes to 127.
"We want to send out an institutional signal saying that the private sector bears its part of the responsibility for the crisis," said MEP Martin Schulz, who heads the parliament's socialist bloc said.
The resolution calls on the EU to support the introduction of a global transaction tax but, "failing that, [it] should implement a financial transaction tax at the European level as a first step," it says.
The plenary session of the parliament in Strasbourg heard that the next step should see the commission produce a feasibility study and produce concrete legislative proposals.
The resolution said a tax on transactions including derivatives would reduce speculation and public deficits. It estimated that a 0.05 per cent tax would generate €200 billion a year in the EU alone and over three times that amount if it was introduced at a global level.
It was drafted by Greek Socialist Anni Podimata, who said it was the second time Parliament had called for the introduction of a transaction tax and called on the Commission to act.
"Citizens have been hit hard by the financial crisis and face growing unemployment," she said. "At the same time, the financial sector remains largely under-taxed and has this year enjoyed profits and bonuses at pre-crisis levels."
France and Germany have already pushed for a global transaction tax at G20 summits but have faced stiff opposition from the US and Canada.
A transaction tax is often known as the Tobin Tax, after James Tobin, the US economist who developed the theory in the 1970s.
The resolution also calls for the introduction of eurobonds as a tool for the management of debt across the EU and wants more measures to be introduced aimed at reducing tax evasion and fraud, which are estimated to cost member states an estimated €250 billion annually.
Elements of a separate resolution on tax and development will not go down well in Ireland as it calls on multinationals companies to be banned from "transferring their profits to countries with the most favourable tax regimes" and says they should pay taxes in the countries where they generate the profits
MEPs also backed an effective ban on “naked” short selling" of securities across Europe. The practice which sees speculators bet on a fall rather than a rise in the price of a security to make a profit, and "credit default swaps", essentially to insure against a state defaulting on its debt obligations, were both heavily implicated in Europe's recent sovereign debt crises.
A draft law which will prohibit the trade in credit default swaps related to sovereign debt unless an investor has a long position in the debt or equivalent assets was backed by 34-to-eight vote.
