At the end of last year, the European Parliament gave the green light to the Financial Transaction Tax.

By an overwhelming majority, 533 Members of the European Parliament voted in favor of the tax whilst only 91 voted against and 32 abstained – bringing the tax one step closer to reality.

The final hurdle is for the European Council of Ministers to approve the proposal. With Germany and France pushing hard for this, there is a strong prospect the breakthrough will happen in the first three months of 2013.

The FTT seems to have momentum right now. We’ve just learned that Lithuania will be the 12th country to sign up to the Financial Transaction Tax in 2013.

We also know that the Netherlands is seriously considering joining in as well, but worryingly this is under the condition that pension funds are exempt from the FTT.

We know from experience that exemptions of any type will be exploited to the detriment of the tax’s effectiveness. If pension funds are exempt avoidance may occur through re-routing trades, re-casting themselves as pension funds, or other forms of creative accounting.

This would reduce both revenue and the FTTs contribution to a more stable, less short-term focused market.

For more information on these arguments, you can read the excellent paper "No Exemptions: The Financial Transaction Tax and Pension Funds", published by the Network for Sustainable Financial Markets.