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Today’s Top Headlines

EU FTT May Yield Annual Revenues Of EUR34bn

by Ulrika Lomas,, Brussels

07 February 2013

The planned European financial transactions tax (FTT) is expected by the European Commission to yield around EUR34bn (USD46bn) annually for the eleven European Union (EU) member states participating in the pioneering project.

Along with the anticipated revenue, a draft document from the European Commission is said to confirm that the financial transactions tax will enter into force as planned in January 2014. Trade in shares and bonds are expected to be taxed at a rate of 0.1%, while trade in derivative products would be taxed at a rate of 0.01%, as advocated by the European Commission in its initial proposal on a EU-wide FTT back in 2011.

Plans to introduce an FTT at European Union level failed due to ongoing and steadfast opposition from both the UK and from Sweden. Revenues from an EU-wide FTT would have generated an estimated EUR57bn annually.

At the end of January, the European Council of Economic and Financial Affairs authorized with a qualified majority EU member states to push ahead with plans for a financial transactions tax within the framework of enhanced cooperation.

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.

The European Commission is due to unveil its concrete proposal on plans for an FTT on February 14, allowing negotiations to begin in earnest.

TAGS: tax | investment | European Commission | Belgium | Portugal | Slovenia | law | banking | financial services | capital markets | tobin tax | Estonia | Slovakia | Austria | France | Germany | Greece | Italy | Spain | Sweden | European Union (EU) | services | Europe

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If the tax was Euro-wide: UK Parliament Economic Sub-Committee of the House of Lords, "The FTT is likely to induce a loss in GDP between five and 20 times larger than the revenues raised from the tax." UK Parliament European Scrutiny Committee citing the EU Commission's FTT Impact Assessment, before even including negative relocation effects, "a 3.43 fall in EU GDP equates to a fall in economic output worth €421 (£362) billion and a 0.34 fall in employment equates to a loss of 812,000 jobs."

Wolfe on Wednesday, February 6, 2013