Monday

25th Jun 2018

EU financial transaction tax on life support

  • Tuesday's accord is a double whammy for pro-FTT states (Photo: Alan Cleaver)

Ten EU countries agreed Tuesday (8 December) on "core principles" for a financial transaction tax (FTT), but real discussion was delayed and the UK threatened to court action if the tax goes against its interests.

After a late night meeting on Monday, finance ministers from Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain presented a one-page proposal to their EU colleagues on Tuesday, outlining how shares and derivatives could be taxed.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... our join as a group

On shares, they decided that "all transactions including intra-day should be taxed" but that "a narrow market-making exemption might be required."

On derivatives, they said "the taxation should be based on the principle of the widest possible base and low rates" and should not affect sovereign bonds issued by member states.

The document is "an important step forward [that] signals a very clear will to go forward," financial affairs EU commissioner Pierre Moscovici said.

But the agreement in fact represents a double setback for promoters of the FTT. This is mainly Austria, who chairs the group, France and the EU Commission, which presented a first proposal for FTT in 2011.

Early this year, they launched a round of talks with the aim of starting to implement the FTT on 1 January 2016.

They hoped to reach agreement before the Paris climate conference and use the tax to fund the fight against climate change and development aid.

The next deadline is now June 2016 and the talks will continue under the EU Council presidency of the Netherlands, a country that is not involved in the plan.

The second setback is that one country, Estonia, left the group of countries willing to introduce the tax.

After the scope of the FTT was established for shares issued in participating countries, Estonia "calculated that the cost of collecting the tax compared to the revenues would not make the tax worth it," an EU official explained.

Just when the deadlined for a final agreement loomed, the 10 remaining countries made do with a proposal that keeps the hope for an FTT alive.

To proceed with the plan under an enhanced cooperation format, there must be at least nine volunteer states. More defections would kill it.

To keep members on board, the document states that "further analysis … is required. Negative impact on real economy and pensions schemes should be minimised."

"What we achieve is modest," Germany's Wolfgang Schaeuble said during the finance ministers' meeting.

"The alternative was to get nothing as that is worse."

Schaeuble however showed some reservations when he suggested that more participants would be necessary to make the tax worthwhile.

"The only thing we can do is to take note of the group document and say that we are going to pursue this next year," said Luxembourg's Pierre Gramegna, who chaired the meeting.

The bulk of the discussion, on the rates applied on all the different instrument included in the tax, has not even started.

"Now that the principles have been agreed, talks will be about what tools are available and how you can draft the legal language," the official said.

As a fiscal issue, the FTT, whenever it is finalised, will require unanimity of the 28 member states even if it is implemented.

One member state will be crucial to reach any deal - the UK. Its minister George Osborne poured cold water on the 10 countries' enthusiasm.

The one-page proposal "is a piece of paper, it's not an Ecofin document," he told his colleagues, using the abbreviation of the finance ministers' council.

The 10 countries can go on with the FTT plan, he insisted, but "it's their business, provided the impact is felt by them." He added that the result is "very uncertain."

Relations between the UK and the eurozone, as well as ringfencing of City of London activities, are at the centre of talks to keep Britain in the EU. But Osborne went even further than a political warning and threatened legal action.

"I make it very clear that if the proposal impacts on the United Kingdom, other non-participating states and on the single markets, we will have to go to court," he said.

"If I hear the words Court of Justice, it is never reassuring," commented Gramegna, insisting that "the discussion must continue in an inclusive manner."

Greece and creditors proclaim 'end of crisis'

After late-night talks, the Eurogroup agreed on a €15bn disbursement and debt relief measures for Greece, while setting out a tight monitoring when the bailout ends in August.

Greek bailout exit takes shape

At a meeting next week, eurozone finance ministers and the IMF are expected to agree on new cash, debt relief measures, and a monitoring mechanism to ensure that Greece can live without international aid for the first time since 2010.

Opinion

The risks behind the 'green bond' boom

The EU should not overuse the financial system in order to achieve environmental goals, or it risks the emergence of a green bond bubble which would be detrimental to the financial sector and hinder the achievement of climate targets.

Opinion

Eurozone needs institutional reform

Both the examples of Greece and Italy test the limits of a system with inherent weaknesses that feeds internal gaps, strengthens deficits and debts in the European South, and surpluses in the European North respectively.

Stakeholders' Highlights

  1. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs
  2. Mission of China to the EUJointly Building Belt and Road Initiative Leads to a Better Future for All
  3. Macedonian Human Rights MovementMHRMI Launches Lawsuits Against Individuals and Countries Involved in Changing Macedonia's Name
  4. IPHRCivil society asks PACE to appoint Rapporteur to probe issue of political prisoners in Azerbaijan
  5. ACCASocial Mobility – How Can We Increase Opportunities Through Training and Education?
  6. Nordic Council of MinistersEnergy Solutions for a Greener Tomorrow
  7. UNICEFWhat Kind of Europe Do Children Want? Unicef & Eurochild Launch Survey on the Europe Kids Want
  8. Nordic Council of MinistersNordic Countries Take a Stand for Climate-Smart Energy Solutions
  9. Mission of China to the EUChina: Work Together for a Better Globalisation
  10. Nordic Council of MinistersNordics Could Be First Carbon-Negative Region in World
  11. European Federation of Allergy and AirwaysLife Is Possible for Patients with Severe Asthma
  12. PKEE - Polish Energy AssociationCommon-Sense Approach Needed for EU Energy Reform

Latest News

  1. Orban allies divided in vote on Hungary sanctions probe
  2. Rutte - from 'Mr No' to 'next Tusk'?
  3. UN offers to help EU's migrant 'disembarkation' plan
  4. Progressive CAP alternative only hope for sustainability
  5. Ponytailed green MEP joins 'the other side of the table'
  6. EU leaders still in search of migration plan
  7. Migration row at centre of EU summit This Week
  8. Merkel's woes cast shadow on EU's future

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic Region to Lead in Developing and Rolling Out 5G Network
  2. Mission of China to the EUChina-EU Economic and Trade Relations Enjoy a Bright Future
  3. ACCAEmpowering Businesses to Engage with Sustainable Finance and the SDGs
  4. Nordic Council of MinistersCooperation in Nordic Electricity Market Considered World Class Model
  5. FIFAGreen Stadiums at the 2018 Fifa World Cup
  6. Mission of China to the EUChina and EU Work Together to Promote Sustainable Development
  7. Counter BalanceEuropean Ombudsman Requests More Lending Transparency from European Investment Bank
  8. FIFARecycling at the FIFA World Cup in Russia
  9. Nordic Council of MinistersOECD Report: Gender Equality Boosts GDP Growth in Nordic Region
  10. Centre Maurits Coppieters“Peace and Reconciliation Is a Process That Takes Decades” Dr. Anthony Soares on #Brexit and Northern Ireland
  11. Mission of China to the EUMEPs Positive on China’s New Measures of Opening Up
  12. Macedonian Human Rights MovementOld White Men are Destroying Macedonia by Romanticizing Greece

Join EUobserver

Support quality EU news

Join us