EU Stalls On FTT

by Ulrika Lomas, Tax-News.com, Brussels

01 May 2012

During a recent European Union Economic and Financial Affairs Council (Ecofin) meeting in Brussels, deep divisions emerged on the creation of a tax on financial transactions, leading to a likely delay in the presentation of new legislation to implement the levy at European level.

Several countries, both within and outside of the eurozone, underlined their grave concerns about Europe pressing ahead with the levy, before gaining full agreement on the tax at international level.

During the course of the meeting, German Finance Minister Wolfgang Schäuble urged his colleagues to press ahead, warning that such discussions would last another twenty years if Europe waited for “the last island” to introduce the levy. While acknowledging that a global solution is undoubtedly the preferred outcome, Schäuble stressed that this would only be achieved once Europe leads the way.

Despite Schäuble’s drive and enthusiasm, it nevertheless soon became clear during the course of the debate, that a tax on financial transactions could only be introduced at eurozone level, although even here opinion was divided.

While Luxembourg and The Netherlands remained sceptical, Ireland put forward its concerns about the idea of the tax being adopted purely within the eurozone.

In stark contrast, Austria’s Finance Minister Maria Fekter reiterated Austria’s commitment to the tax and its determination to continue to push intensively for the tax to be implemented at least by the 17 eurozone states.

Given the enormity of the implications for its financial centre, the UK bitterly criticized and opposed the tax at the meeting. Indeed, UK Chancellor George Osborne called for the idea of a financial transactions tax to be buried. Osborne underlined the need to debate measures designed to move Europe forward, not proposals that would merely serve to destroy jobs and to drive out business.

At the Ecofin meeting, EU Commissioner for Taxation Algirdas Semeta presented to EU finance ministers the European Commission’s plans for a Tobin tax, as outlined at the end of September.

At the time, the Commission advocated that a 0.1% rate would be imposed on shares and bonds, while a 0.01% rate would apply to other products. To mitigate the risk of relocation, the levy would be imposed on the financial institution at their place of residence. Under the Commission’s plans the tax would focus on transactions that take place between financial institutions, representing 85% of all financial transactions. Transactions of individuals, such as credit card payments or private loans, savings or insurance contracts would fall outside the scope of the tax.

Commenting on the outcome of the meeting, Semeta alluded to the fact that although the discussions were “extremely interesting”, more talks were needed to find a consensus on the issue.

Semeta welcomed the general level of support for the proposed tax, for example among ministers, stakeholders, non-government organizations and individuals, noting that it was “very encouraging” and showed that there is a huge momentum behind the idea.

While conceding that “there may not have been agreement on the global implementation of a financial transactions tax at the G20 last week, Semeta explained that there was an “undisputable consensus on the need for all countries to ensure fiscal justice or, to put it simply, fairness the way that all sectors are taxed”.

Underlining that the tax proposed by the Commission offers substantial revenues at a time when they are so badly needed, around EUR57bn annually, Semeta stressed that the income, to be shared between EU and national budgets, would serve the dual purpose of bolstering national revenues, and reducing the contribution that member states need to make to the EU budget.

Adamant that the Commission would not reconsider its proposal on the basis of the G20 summit, Semeta insisted that the message that emerged strongly from Cannes was that such a levy at regional level is feasible.

He argued that “even applied only at EU-level, this proposal for an FTT has countless benefits to offer”.

Concluding his statement, Semeta said: “The Commission will continue to support the Presidency and the Council in working towards an agreement amongst member states on what I see as a well-designed and very workable proposal for a financial transactions tax here in the EU”.

Recommended