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Semeta Talks FTT

by Mike Godfrey,, Washington

28 February 2013

A precedent is being set by the eleven European Union countries adopting a regional Financial Transactions Tax (FTT), Algirdas Šemeta has said, stressing that he has "every confidence" that others will follow suit.

The European Union Commissioner for Taxation made the comments at an event in Washington earlier this week. Referring to the decision to press ahead with an FTT through the EU's enhanced cooperation mechanism, Šemeta said that so convinced were these eleven Member States of the benefits of an FTT "that they refuse to let others hold them back."

Enhanced cooperation offers a system whereby EU member states wishing to work more closely together can do so, while respecting the legal framework of the Union. In principle, at least nine states must be involved in enhanced cooperation, but it remains open to any state that wishes to participate.

The European Commission gave the go ahead for enhanced cooperation on an FTT in October last year, based on a request by Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia. The European Parliament backed the use of enhanced cooperation in December. The European Council of Economic and Financial Affairs (Ecofin) authorized the procedure in January, and concrete proposals were presented by the Commission on February 14. Under these plans, the FTT will apply from January 2014. Share and bond transactions are to be taxed at a rate of 0.1%, and derivatives transactions will be taxed at 0.01%.

Referring to the proposals, Šemeta said that his FTT was "designed to capture all transactions, all instruments, and all actors, without disrupting the functioning of markets." Sending out a warning to critics, he added that "The only way to avoid the tax will be to give up all financial trading with those established in the FTT-zone, and forego any financial products that are issued there," labeling this "a highly irrational response to a small tax."

Šemeta expects the FTT to generate approximately EUR30-35bn (USD39.2-45.7bn) a year for the Member States applying it. This revenue will offer "a significant new resource for stabilizing public finances, growth-friendly investment or meeting global commitments such as development and climate change." He also believes that the FTT will help redress the balance of taxation in Europe, where the financial sector is currently under-taxed. The FTT will enable States to "ensure that the financial sector makes a fair contribution to the public purse, and to the costs of the crisis which everyone knows, is still not over yet," Šemeta added.

In his closing statements, Šemeta turned to the global application of the FTT, which he believes can, and should, be achieved. He retains hope that, through the example now being set, "a global FTT will also be a reality some day." The US in particular remains to be convinced - something Šemeta recognizes - but he intends to encourage the FTT's supporters there, and to continue to hold meetings with individuals in Washington.

"This is a chance to prove the benefits of a well-designed FTT, and to confound the long-time cynics. And, once this is done, I have every confidence that others will follow in applying the fair and sensible Financial Transaction Tax," Šemeta concluded.

TAGS: individuals | compliance | tax | European Commission | tax compliance | Belgium | Portugal | Slovenia | tobin tax | Estonia | Slovakia | tax rates | Austria | France | Germany | Greece | Italy | Spain | United States | revenue statistics | tax reform | Europe

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