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28th Aug 2016

EU financial transactions tax gets enough support to take off

  • How will the money be used - that is one of the next big questions (Photo: Images_of_Money)

A threshold-breaking eleven member states have agreed to push ahead with a financial transactions tax but the political breakthrough is tempered by a number of unanswered questions.

"Today we have received a clear and very welcome signal that there will be enough member states on board for an EU Financial Transactions Tax," EU tax commissioner Algirdas Semeta said Tuesday (9 October).

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He promised to come forward with a decision in November but noted that at least nine countries have to formally make a request in order to trigger a legislative process for a splinter group of member states.

So far, Germany, France, Austria, Portugal, Belgium, Slovenia and Greece have sent a letter to the commission in favour of the move. Italy, Spain, Slovakia and Estonia promised to do so after Tuesday's meeting of finance ministers.

"We would prefer to get the remaining letters before the middle of October," said Semeta noting that the commission both has to make an assessment of the applications as well as put forward a proposal by the promised deadline of 13 November, the date of the next finance ministers meeting.

The FTT progress is a victory particularly for French president Francois Hollande, who has been one of the most vocal supporters of this so-called Robin Hood tax. More broadly it has symbolic importance, with the agreement coming on the back of several months of discussion about the feasibility and possibility of introducing such a levy.

But still the tax remains controversial - six of the 17 euro countries are not among the pioneering group - and even where there is broad agreement, much of the detail still has to be elaborated.

It is not clear what the scope of the tax will be, such as whether it will include foreign exchange transactions.

The UK, a staunch opponent of the tax, reminded other member states that the EU treaty says that any proposal for so-called enhanced cooperation between a group of member states must not undermine the internal market.

"We want to see a specific proposal," said UK finance minister George Osborne. Poland, though taking a less hawkish line, was in agreement. "It would be good to have more detail," said finance minister Jacek Rostovski.

Semata, for his part, said that the commission could proceed on the basis of the proposal it made last year. At the time, it suggested a minimum tax rate for the trading of bonds and shares of 0.1 percent and 0.01 percent for the much larger market of derivative products (bets on currency fluctuations, mortgages, loans or even the weather).

The commissioner said participating member states could spend the money raised by the levy "where they deem appropriate" suggesting that development aid commitments could be one area.

The commission has also suggested that part of the money raised could be put towards the EU budget in return for lowering a country's automatic gross national income based contribution.

But this is a separate decision that would have to be taken a part of an overall EU budget agreement.

The commission proposal allowing the FTT group to go ahead, due in November, has to be agreed by a qualified majority of all 27 member states. The European Parliament must also give its consent.

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