The European executive has formally tabled plans for a union-wide tax on financial transactions to come into force from 2014.
The European Commission has proposed the 0.1 per cent “Tobin Tax” on all stock and bond trades, and an 0.01 per cent levy on derivatives trades, to raise a projected €57bn (£49.5bn) per year.
The tax would be imposed on all transactions in financial instruments between financial firms when at least one party to the trade is based in the European Union.
The revenue would be divided between the EU's own budget to cut national contributions, with the rest going directly to member states.
The plan will have to be put to all EU member states for approval but the UK has already said such a tax would only work if adopted worldwide.
City experts warned that the proposal would hinder economic recovery and destroy banks’ business models.
“Europe needs to focus on rebuilding its economies and fostering recovery. This proposal will do nothing to support either of those aims. It will, however, have the effect of hampering economic recovery and future growth,” said Simon Lewis, chief executive of the Association of Financial Markets in Europe.
“The FTT will fundamentally change - and in some cases destroy - the business models of financial institutions within Europe and will put them at a disadvantage unless implemented globally,” said Tom Aston, financial services tax partner at KPMG.
Canada, the US, Australia and China also oppose the tax because it puts more burden on banks, while France, Germany, Austria, Belgium, Norway and Spain support it, along with several African states.
"With this proposal the European Union becomes a forerunner in the global implementation of a financial transaction tax," EU Tax Commissioner, Algirdas Semeta, said in a statement.
"Our project is sound and workable. I have no doubt this tax can deliver what EU citizens expect - a fair contribution from the financial sector. I am confident that our partners in the G20 will see their interest in following this path."