EU Unites On Financial Transactions Tax

by Ulrika Lomas, Tax-News.com, Brussels

19 May 2010

During a recent European Union (EU) finance ministers meeting, there was overwhelming support for a plan to levy a tax on financial transactions in Europe.

EU member states also agreed to step up calls at international level for the financial sector to contribute more to overcoming the crisis. Luxembourg’s Prime Minister, and Chairman of the ministerial meeting, Jean-Claude Juncker, emphasized that this included the introduction of a financial transactions tax.

Juncker maintained that no EU country had voiced its opposition to this course of action, and warned that those responsible for the “mess” must also pay. Underlining his support for the tax at EU level if necessary, Juncker stated that Europe could not always “hide behind the Americans”.

In Germany, however, the issue of a financial transactions tax is highly explosive and divisive. While the Social Democrats (SPD) are in favour, Chancellor Angela Merkel has ruled out the introduction of such a tax, citing the lack of international support. The Christian Social Union (CSU) has also resolved to make the financial sector contribute to the costs of overcoming the crisis, and has therefore not yet rejected the tax.

Austria’s Chancellor Werner Faymann declared recently that the introduction of both a bank tax and a financial transactions tax are “absolutely vital,” along with efforts to plug tax loopholes. Eager for Austria to lead the way, Faymann warned that a financial transactions tax will be introduced in Austria in 2011 if there is failure to reach an agreement at EU level. Faymann is due to meet with Germany’s Chancellor Merkel in Berlin to try to convince her of the merits of a financial transactions tax. Europe as a whole has not really learned from the crisis, he added.

In the course of the EU ministerial conference, in a bid to bring speculators to heel, EU member states also made clear their intention – despite opposition from the UK – to impose stricter rules on hedge funds. In order to make the sector more transparent, hedge funds in Europe should have a reporting duty in future and disclose their investment strategies, they argued.

Recommended