Wednesday

28th Sep 2016

EU commission plans new spin on financial tax

  • Commissioner Algirdas Semeta is revising his institution's initial assessment of the tax (Photo: European Parliament)

The EU commission is revising its impact assessment of a proposed financial transactions tax (FTT), which included a worst-case scenario leading to job losses. The responsible commissioner now says original projections were "misused" and the overall impact will be positive.

"The commission services are carrying out a fine-tuned economic analysis," a spokeswoman for commissioner Algirdas Semeta, in charge of taxation, told this website on Friday (3 February).

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

The revised impact assessment is expected to focus on the positive impact of a 0.1 percent tax on primary markets and 0.01 percent on the much larger and more speculative market for derivatives.

The commission's first assessment, published in September last year, suggested that in the long run such a tax could reduce future GDP by 1.76 percent. It also said there was a risk companies would relocate to escape the tax.

The commission is currently saying the levy could raise some €57 billion a year, from a sector widely blamed for causing the 2008 financial crisis.

In an op-ed published in several European newspapers on Thursday, Semeta said the tax has gained wider acceptance among member states and that a "huge popular momentum" has formed behind it. He noted a "certain resistance by some" countries, however - a likely reference to British Prime Minister David Cameron who has said the scheme is "madness."

"The commission's own figures have been misused and misrepresented to create doomsday scenarios around the impact on growth, jobs and competitiveness," Semeta wrote.

In an attempt to "put the record straight on some of the myths" surrounding the tax, Semeta said it will not damage growth or lead to job losses: "All taxes, when looked at in isolation, carry an economic cost. But the cost of the financial transactions tax is small, and it is legitimate compared to the huge volume of support that the financial sector has received in recent years."

Instead of a downwards effect, the tax could be used to reduce other taxes or boost investment in public services and infrastructure making it "positive for growth and employment in Europe."

He disregarded ideas that ordinary people will somehow get hit, saying 85 percent of the targeted transactions take place exclusively between financial institutions.

He added that the British objection - that businesses will flee Europe - is unfounded because the tax is to apply to wherever the transaction takes place not where the firm is domiciled. "Those who allege that the FTT will lead to a mass exodus of financial markets from Europe, have either not read the commission's proposal, or failed to understand it," he said.

French experiment

France and Germany are the biggest supporters of the initiative among member states, with Italy also joining the bandwagon.

But Nicolas Sarkozy's upcoming bid for re-election has seen him race ahead of Germany's Angela Merkel in announcing a unilateral tax, even as Germany advocates an EU-wide levy.

In a major speech last week, he announced a "Robin Hood" tax on financial markets to come into force from 1 August. The tax would affect stock trading only, but not the larger and wilder derivatives market, amid a fiercely negative reaction from Paris' top bankers.

Sarkozy instead promised to impose special levies on credit default swaps - a complex product which bets on the performance of debt - and high frequency trading, but at a later stage.

Sarkozy's opponent and frontrunner in the polls, the centre-left Francois Hollande, wants a tax on derivatives as well. So do development NGOs, who would like revenues to be used for helping poorer countries meet climate change commitments.

"We want to make sure the money doesn't go to pay back loans, it should be used for social expenditures, for meeting the United Nations commitments for development," said Jean Saldanha from Cidse, which has been pushing for a tax on financial transactions since 1999.

Investigation

Diesel cars still dirty, despite huge EU loans

The European Investment Bank lent billions to carmakers, in part to clean up diesel cars. But diesel cars are still dirty, prompting questions if the money was well spent.

EU redoubles attack on roaming charges

After an embarrassing U-turn last week, the EU commission has proposed to abolish roaming charges by June next year. Only "abusive" clients to pay.

Stakeholders' Highlights

  1. GoogleDid You Know Europe's Largest Dinosaur Gallery Is in Brussels? Check It Out Now
  2. IPHRHuman Rights in Uzbekistan After Karimov - Joint Statement
  3. CISPECloud Infrastructure Providers Unveil Data Protection Code of Conduct
  4. EFAMessages of Hope From the Basque Country and Galicia
  5. Access NowDigital Rights Heroes and Villains. See Who Protects Your Rights, Who Wants to Take Them Away
  6. Martens CentreQuo Vadis Georgia? What to Expect From the Parliamentary Elections. Debate on 29 September
  7. EJCAppalled by Recommendation to Remove Hamas From EU Terrorism Watch List
  8. GoogleBringing Education to Refugees in Lebanon With the Clooney Foundation for Justice
  9. HuaweiAn Industry-leading ICT Solution Provider and Building a Better World
  10. World VisionUN Refugees Meeting a Wasted Opportunity to Improve the Lives of Millions of Children
  11. Belgrade Security ForumCan Democracy Survive Global Disorder?
  12. GoogleTrimming the Waste-Line: Weaving Circular Economy Principles Into Our Operations