Friday

28th Jul 2017

EU countries as divided as ever on finance tax

  • A finance tax has a lot of support among the public (Photo: Swift)

Member states remain thoroughly divided on the merits of a financial transactions tax (FTT) following a discussion on Tuesday (13 March). A small group forging ahead with the plan is not an automatic process either.

With 12 finance ministers taking the floor for a political discussion on the controversial idea, the debate cemented the well-known public positions of several countries - from the no-go of the UK and Sweden to Germany's outright support and several shades in between.

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"We need a decision in the foreseeable future," said German minister Wolfgang Schauble, adding that he prefers an agreement among all 27 member states. He indicated that if the FTT project falls by the wayside, he might seek to make banks subject to VAT.

"I can't see why we have value added tax on every exchange of services except financial services. It doesn't make sense."

Austria's Maria Fekter said it is important to counteract the belief among the general public that "markets are ruling us."

The Czech Republic, Luxembourg, Malta, the Netherlands, Sweden and the UK - home to the EU's biggest financial centre - all spoke out against the FTT. Dutch finance minister Jan Kees de Jager referred to independent studies which indicate there would be a "very big shift" of businesses to other jurisdictions if such a tax is introduced.

Sweden's Anders Borg spoke of the "long historical commitment" that Swedes have to setting taxes for themselves: "For us, the financial transaction tax would be very difficult to accept."

A sole point of agreement was that the European Commission's proposal - published last October - needs further analysis.

The three technical discussions so far have thrown open a series of questions, such as the extent to which companies would relocate if a tax is introduced, how it would be collected and used, who would be liable to pay and its macroeconomic effects.

Political effect

Tuesday's discussion was for political as well as practical effect as it was clear from the outset no agreement would be reached.

"At least one government wants to have progress on this before April," said an EU diplomat, with France in mind.

French President Nicolas Sarkozy, in campaign mode ahead of 22 April elections, has talked up the merits of such a tax and said his country will introduce its own version, to go into effect in August and to add €1 billion annually to state revenues.

France and eight other capitals in February sent a letter urging the Danish EU presidency to speed up work on the dossier. The letter prompted speculation the nine signatories - the minimum required - would forge ahead with a financial tax among themselves.

It is not as easy as it sounds, however.

Enhanced co-operation, as it is called, can only be used as a last resort under EU rules. Member states have to first make a decent attempt at getting agreement by all 27. Only if this fails can a group then apply to the commission for a proposal on how to go it alone.

Meanwhile, a financial transaction tax means different things to different people. France's financial services tax - limited to the purchase of shares of large listed companies - is narrow in scope.

The European Commission's proposal - which it says will bring in annual revenues of €57 billion if introduced at EU level - is broader, suggesting a tax on trading of stocks, bonds, derivatives and other financial contracts.

For its part the commission has its own reasons for trying to find an agreement among all member states.

If a group of countries develop the idea among themselves, the commission will no longer be able to include such a tax as a revenue-producing part of the the EU's next long-term budget.

EU tax commissioner Algirdas Semeta said he would come forward with further analysis of the idea ahead of the next technical discussion on the issue in April.

Greece looking at bond market return

Greece could issue 3-year bonds as early as this week, for the first time in three years, amid mixed signs from its creditors and rating agencies.

Greece to get €7.7bn loan next week

The ESM, the eurozone emergency fund, agreed on Friday to unblock a new tranche of aid as part of the bailout programme agreed upon in 2015.

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