A tax on the total profits and wages of financial companies is a better way to raise revenue from the European industry than taxing financial transactions, the European Commission said in a paper released today.

The issue of taxing the industry has become a contentious topic for European Union governments, which are desperately searching for sources of revenue to reduce their large budget deficits. Germany, Austria and France have supported taxing financial transactions, saying that banks and other parts of the industry should help pay for the costs of responding to the financial crisis.