Barnier Renews Drive For Europe-Wide FTT

by Ulrika Lomas, Tax-News.com, Brussels

10 February 2012

In the ongoing debate over the introduction of a financial transactions tax, European Commissioner for the Internal Market Michel Barnier has recently insisted on the need for a “complete solution” involving all 27 European Union (EU) member states.

Barnier underscored that a tax on financial transactions makes both “economic and financial” sense and would be politically “fair” as well as technically simple, maintaining that once created, the levy will be “financially productive” and will “stand up economically”.

While acknowledging that the idea of the tax is viewed by many with a great deal of scepticism, Barnier nevertheless stated his hope that the European countries currently championing the levy will be able to show other EU member states that it is useful.

Commissioner Barnier’s remarks followed hot on the heels of a recent statement by the French Finance Minister François Baroin announcing that nine European countries have addressed a joint letter to the Danish Presidency of the European Union calling for work to be accelerated on European plans for a tax on financial transactions.

According to Baroin, Italy’s Prime Minister, and the Finance Ministers of Germany, Austria, Belgium, Spain, Finland, France, Greece and Portugal, all signed the letter “underlining their firm conviction” that a tax on financial transactions is necessary at EU level not only “to ensure a fair contribution from the financial sector to the cost of the financial crisis”, but also “to improve regulation of the financial markets”.

The Italian Prime Minister and the eight European finance ministers provided their “full support” for the principle of the directive, he added.

The French Finance Minister explained that given the great expectations of public opinion in Europe, the ministers also urged the Danish Presidency to accelerate the work of the European Council in order to achieve a first reading of the directive bill in the first half of 2012.

Concluding his statement, Baroin underscored that the move, a Franco-German initiative, “is a very powerful signal” to show that “the heart of the eurozone is determined” to move forward.

The joint letter demonstrates that the proposal for a French transactions tax is complementary to the EU movement, and may even lead other member states to join the movement.

French President Nicolas Sarkozy confirmed plans at the end of last month to introduce a tax on financial transactions tax in France in August. In accordance with the plans, a 0.1% tax will be imposed on all transactions in French securities, while credit default swaps and speculative 'automated' trading will also be subject to the tax.

The European Parliament is currently preparing an official opinion to the Commission’s proposal, unveiled last September, with a draft report due to be presented in March.

Recently, financial experts at an Economic and Monetary Affairs Committee meeting considered that “a eurozone financial transaction tax would not only curb high-frequency and intermediary traders, but could even boost overall GDP”. Indeed, MEPs also reiterated their support for the idea, although some pointed out that the Commission’s proposal needs more fine-tuning.

Anni Podimata, who is preparing Parliament's opinion on the Commission proposal, defended the tax as a way to raise "considerable funds in the fairest possible way", underlining that it would have a second beneficial effect “by removing incentives to enter into financial transactions that generate no value-added besides profit for the traders carrying them out.”

Recommended