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Time Running Out For EU FTT Deal

by Ulrika Lomas,, Brussels

06 June 2016

Austrian Finance Minister Joerg Schelling has revealed that plans to introduce a tax on certain financial transactions in the EU are close to being shelved, unless the member states involved in the discussions can come to an agreement by the end of the month.

Talks on the proposed financial transactions tax (FTT) have been ongoing for around four years, but the participating member states have found it very difficult to arrive at a consensus on the details of the new directive. Last December, the FTT group set a deadline of June 2016 to reach a deal, but, according to Schelling, ministers are no nearer to reaching an agreement.

Under the proposed FTT directive drafted by the Commission in 2011, the tax would 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. The tax was expected to produce revenues of as much as EUR35bn (USD40bn) a year, which supporters of the idea argue represents a fair price for the financial sector to pay for its involvement in the financial and economic crisis.

However, it would appear that member states are still at loggerheads over the scope of the tax and how to use its revenues.

The participating member states are advancing the FTT on the basis of enhanced cooperation, a rarely used legislative mechanism allowing at least nine countries to proceed with a new directive when the usual requirement of unanimity between all 28 member states cannot be achieved.

Originally, the 11 member states that agreed to introduce the FTT included Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia, and Slovakia. However, Estonia has effectively pulled out of the FTT after refusing to sign last December's interim agreement. Slovenia is also wavering, while last month Belgium expressed reservations about the structure of the tax. All three countries jumping ship would mean that there would be an insufficient number of member states left to proceed with the FTT under the enhanced cooperation procedure. Indeed, Schelling told reporters following the latest discussions that at least one other member state could also pull out, reducing the FTT group to just seven countries.

EU finance ministers are likely to discuss the FTT at their upcoming meeting on June 17.

TAGS: Finance | tax | investment | economics | Belgium | Portugal | Slovenia | financial services | Estonia | Slovakia | legislation | Austria | France | Germany | Greece | Italy | Spain | European Union (EU) | services | Europe | Tax | Financial Transactions Tax (FTT)

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