Nine EU countries form splinter group on financial tax
A group of nine euro-countries led by France and Germany on Tuesday (7 February) asked the Danish EU presidency to fast-track plans for a financial transactions tax - a move indicating they will forge ahead on their own in the absence of an EU-wide consensus.
"We strongly believe in the need for a financial transactions tax implemented at European level as a crucial instrument to secure a fair contribution from the financial sector to the costs of the financial crisis and to better regulate European financial markets," the letter says.
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The nine signatories are the finance ministers of France, Germany, Austria, Belgium, Finland, Greece, Spain, Portugal and the Prime Minister of Italy, Mario Monti, who also holds the finance portfolio.
They group asks the Danish presidency "to accelerate the analysis and negotiation process" of a proposal by the EU commission to introduce a 0.1 percent tax on stocks and 0.01 percent on trading in derivatives - the larger and riskier financial market held widely responsible for the 2008 financial crisis.
For its part, the Danish EU presidency "welcomes" the letter and is "currently looking into how to accommodate the request" at the technical level - meaning a new political discussion among finance ministers - it said in an emailed statement to press.
Britain and a handful of other countries fiercely oppose the tax arguing that it will lead to business flight and job losses in their financial sectors, making an EU-wide tax highly unlikely.
But the letter signals it could be introduced among fewer countries, with a minimum of nine member states needed to trigger so-called 'enhanced cooperation' - a group of like-minded member states pushing forward on legislation to be joined by others at a later stage.
Member states already used the legal option for the EU patent, which was gradually subscribed to by all member states except Spain.
Economists in favour of the financial transactions tax say the gradual approach will work. "Even national introduction is a positive step. The financial sector played a major role in the 2008 crisis, but it still remains one of the most under-taxed parts of the economy, for instance they pay no VAT," Stephany Griffith-Jones from Colombia University told an EU parliament hearing on Monday.
The British argument that investors will flee once the tax is introduced is incorrect, said Avinash Persaud, a London-based investment consultant, since the government already levies a stamp duty - unilaterally introduced in 1986 - on stocks traded in the City,
"Forty percent of this levy is paid by foreign residents. So far from sending them abroad, this stamp duty is paid by more foreigners than any other tax," he pointed out.
For its part, the EU Commission estimates that over €50 billion could be raised within the bloc if such a tax was introduced.
"The question we should ask is what is the least growth-unfriendly way of raising €50 billion in Europe. It is a financial transactions tax, not raising the VAT or increasing employment taxes," said Sony Kapoor from Re-Define, a think tank.