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Austria May Pull Out Of European Financial Transactions Tax Talks

by Ulrika Lomas,, Brussels

03 March 2020

On February 19, 2020, German Finance Minister Olaf Scholz issued a statement to say that he remains "committed" to the introduction of a financial transactions tax at European Union level along the same lines as that proposed by the German Government last month, despite opposition from within the EU, notably from Austria.

"This is an important step towards fair taxation of financial transactions and more tax justice," said a summary of Scholz's remarks on the Finance Ministry's website. "There are already good examples of this in many European countries, including those with large stock exchanges."

Scholz's statement followed the approval by the Federal Cabinet in its weekly meeting of the basic state pension, which is to be partly financed by German revenues from the FTT, which the Government anticipates will be around EUR1.5bn (USD1.6bn) per year.

The German proposal, which was presented to EU finance ministers last month as a way of breaking an ongoing deadlock on the scope and rates of an EU FTT, is based on France's financial transactions tax. Under this model, a tax of 0.2 percent would be imposed on the purchase of shares in domestically listed companies with a market capitalization in excess of EUR1bn. The tax would also apply to depositary receipts issued domestically and abroad and which are backed by shares in these companies. Initial share offerings would be excluded from the FTT.

The German Government argues that a tax of this type would be borne mostly by large institutional investors. However, Austria has warned that these proposals would disproportionately affect small retail investors, and Finance Minister Gernot Blumel recently reiterated his Government's opposition to the German plan.

"The original goal was to stop unethical financial speculation after the economic and financial crisis. In the end, the submitted proposal would only affect the real economy and small investors. The speculators would get away again," Blumel said in an interview with Handelsblatt.

"We should go back to the original proposal from the EU Commission. The aim is to record and tax high-frequency trading, derivatives transactions, and intraday trading. We absolutely support that. We urgently need a new proposal," Blumel added, warning that Austria would leave the discussions if there was no change in approach to the issue.

As initially proposed by the European Commission in 2011, the FTT was to be imposed on all transactions in financial instruments, with the exchange of shares and bonds taxed at a rate of 0.1 percent and derivative contracts at a rate of 0.01 percent. However, member states failed to reach an agreement on the technical details of the draft directive.

Besides Austria and Germany, eight other member states are taking part in the negotiations towards an EU FTT, including Belgium, France, Greece, Italy, Portugal, Slovakia, Slovenia, and Spain. These countries are participating in the initiative under the EU's enhanced cooperation mechanism, which allows smaller groups of member states to proceed with EU legislation when unanimity on a proposal cannot be achieved. However, a minimum of nine member states are required to take draft legislation forward on the basis of enhanced cooperation.

TAGS: Finance | tax | European Commission | Belgium | Portugal | Slovenia | speculation | banking | financial services | Slovakia | legislation | stock exchanges | Austria | France | Germany | Greece | Italy | Spain | retail | European Union (EU) | services | Europe | Tax | Financial Transactions Tax (FTT)

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