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The European Council of Economic and Financial Affairs (Ecofin) has authorized with a qualified majority European Union (EU) member states to push ahead with plans for a financial transactions tax (FTT) within the framework of enhanced cooperation.
The European Commission can now present a concrete proposal on plans for an FTT, allowing negotiations to begin.
Underscoring that this is the first act of enhanced cooperation in the history of the European Union in the area of taxation, the French finance ministry stressed that nothing will now stand in the way of the process, noting that the European parliament gave its approval on December 12, 2012.
Enhanced cooperation is a procedure enabling a group of EU member states (minimum of nine) to launch coordinated action on a proposal in the event that a consensus is not possible among all twenty-seven EU member states.
In October 2012, eleven EU member states - Germany, France, Austria, Belgium, Spain, Estonia, Greece, Italy, Portugal, Slovakia and Slovenia – requested the use of enhanced cooperation to press forward with the FTT.
Germany and France have championed the levy from the outset. According to the German finance ministry, the introduction of an FTT in eleven EU member states is a first key step in the direction of the introduction of a global tax. Emphasizing that the aim of the tax is to ensure a fair and equitable contribution from the financial sector to the costs of the banking crisis, the ministry pointed out that the tax complements other regulatory measures taken by the coalition government, notably Germany's draft high frequency trading law.
Insisting that the future financial transactions tax must include all possible financial instruments, have a wide base and a low tax rate, the finance ministry warned that the levy should not merely be limited to financial transactions carried out on the stock markets and regulated trading platforms but should also apply to trading carried out outside of this sphere.
Highlighting the fact that Germany and France paved the way for enhanced cooperation on a financial transactions tax in Europe, German Finance Minister Wolfgang Schäuble welcomed the fact that nine other EU members agreed to back the plans. Underlining the need for the financial sector to contribute appropriately to the costs of the financial crisis, and noting that this goal is now ever closer, Schäuble said that the fact that this decision coincides with the 50th anniversary of the signing of the Elysée treaty underlines the vitality of Franco-German friendship.
Underlining that Austria has also backed plans for the introduction of an FTT from the outset, while ruling out the idea of proceeding unilaterally, Austria's Finance Minister Maria Fekter maintained that once a model is in place, other member states will follow suit, an allusion to Eurogroup Chairman and Dutch Finance Minister Jeroen Dijsselbloem's remarks that the Netherlands might also participate.
EU Tax Commissioner Algirdas Semeta said that the agreement to allow eleven member states to move ahead with a harmonized FTT is a "major milestone."
Semeta stated: "It is a milestone for EU tax policy, as it paves the way for more ambitious member states to progress on a tax file, even when unanimity could not be achieved. Those who want to move ahead, and who appreciate the merits of working more closely on taxation at EU-level, can do so. This is a highly significant and very welcome advance."
He concluded: "For the first time ever, the financial transactions tax will be applied at regional level. A block representing around two thirds of EU GDP will implement this fair tax together, answering the long-time calls of their citizens. And in doing so, they can pave the way for others to do the same."
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