Election 2015

Reality Check: How would the Green’s financial transaction tax work?

City of London landscape Image copyright PA

As part of their election manifesto, the Green Party says it would introduce a "Robin Hood tax" on transactions involving shares, bonds and financial contracts called derivatives. Traders would pay a fee each time a transaction takes place.

The party said it would scrap existing stamp duty on deals involving shares. A transaction tax could raise £20bn a year for the UK Exchequer and help stabilise markets, it said.

The idea of taxing financial transactions is not new. Sweden introduced a similar tax in the mid-1980s but subsequently abandoned the measure after many trading companies left the country.

The European Commission tried to introduce a transaction tax back in 2011 but failed in the face of opposition from several EU countries (including the UK).

A smaller group of member states - including Germany, France, Spain and Italy - are trying to take the project forward among themselves but have not yet reached an agreement.

The arguments for a transaction tax are that it could raise considerable sums. Some say the tax has the potential to make financial markets less volatile as it would deter speculative trades that warp prices.

It has also been argued the City should pay more following its role in the recent financial crisis.

Opponents argue that the tax could threaten London's success as a financial hub, as companies would relocate elsewhere to avoid higher charges.

And there are fears that any additional costs to financial companies would be passed onto consumers.

There is also a view that any financial benefits would be dwarfed by the costs of a weaker economy that could result.

When the measure was put forward at an EU level, the UK was part of a vanguard of countries to defeat the motion. Britain even took the European Commission to court to challenge the legality of such a tax but wasn't successful at this stage.

We have yet to see any detail about the Greens' proposed measure. While there are precedents that could help policymakers looking to develop a transaction tax, a British government seeking to do so would likely face strong resistance.

Election 2015 - Reality Check

What's the truth behind the politicians' claims on the campaign trail? Our experts investigate the facts, and wider stories, behind the soundbites.

Read latest updates or follow us on Twitter @BBCRCheck