German Parliament Divided Over Financial Transactions Tax

by Ulrika Lomas, Tax-News.com, Brussels

04 February 2010

Despite emphatic calls from German Opposition groups, the Social Democratic Party (SPD) and the parliamentary Left group, for the introduction of an international financial transactions tax, as well as measures designed to curb both speculation and excessive banking bonuses, their request has found little support from either the Free Democratic Party (FDP) or from the Christian Democratic Union (CDU).

Determined to ensure that banks in Germany contribute to the cost of the financial crisis, the SPD and the parliamentary Left faction recently urged the coalition government to obtain international agreement on the introduction of an international financial transactions tax. The Left group also urged the government to introduce the levy at national level, until agreement is reached at either international or European level.

Defending the idea of a national financial transactions tax, Axel Troost (Left faction) emphasized the fact that savers would only be taxed once at 0.01% (maximum 1%) on the acquisition of stocks and shares.

Nevertheless, Frank Schäffler (FDP) expressed his vehement opposition to the introduction of the tax at national level. Indeed, citing the example of Sweden, a country which elected in 1984 to introduce a stock market sales tax, Schäffler pointed out that this decision had a very negative effect on the country’s financial center, dramatically reducing the volume of trade – which was transferred abroad – by around 80%.

According to Schäffler, the introduction of a financial transactions tax would be the wrong solution, given that “cheap money” lies at the heart of the crisis. The government should strive to end the policy of cheap money instead, he concluded.

Gerhard Schick of Alliance 90/The Greens fiercely criticized the government’s failure to establish a clear policy on the issue, highlighting the fact that it is impossible for the government to negotiate internationally when their actual position remains unclear.

Recommended