Monday

4th Mar 2024

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).

Read and decide

Join EUobserver today

Get the EU news that really matters

Instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

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.

Opinion

Financial transactions tax: No surrogates, please

Watering down the financial transactions tax to a stock tax with many loopholes doesn’t do the job of curing an ailing system and raising sufficient money to tackle poverty and climate change, writes Bernd Nilles.

EU supply chain law fails, with 14 states failing to back it

Member states failed on Wednesday to agree to the EU's long-awaited Corporate Sustainable Due Diligence Directive, after 13 EU ambassadors declared abstention and one, Sweden, expressed opposition (there was no formal vote), EUobserver has learned.

Opinion

Why are the banking lobby afraid of a digital euro?

Europeans deserve a digital euro that transcends the narrow interests of the banking lobby and embodies the promise of a fairer and more competitive monetary and financial landscape.

Latest News

  1. EU socialists fight battle on two fronts in election campaign
  2. EU docks €32m in funding to UN Gaza agency pending audit
  3. 'Outdated' rules bar MEP from entering plenary with child
  4. Commission plays down row over Rwanda minerals pact
  5. EU socialists set to anoint placeholder candidate
  6. Why are the banking lobby afraid of a digital euro?
  7. Deepfake dystopia — Russia's disinformation in Spain and Italy
  8. Putin's nuclear riposte to Macron fails to impress EU diplomats

Stakeholders' Highlights

  1. Nordic Council of MinistersJoin the Nordic Food Systems Takeover at COP28
  2. Nordic Council of MinistersHow women and men are affected differently by climate policy
  3. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  4. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  5. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  6. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?

Stakeholders' Highlights

  1. Georgia Ministry of Foreign AffairsThis autumn Europalia arts festival is all about GEORGIA!
  2. UNOPSFostering health system resilience in fragile and conflict-affected countries
  3. European Citizen's InitiativeThe European Commission launches the ‘ImagineEU’ competition for secondary school students in the EU.
  4. Nordic Council of MinistersThe Nordic Region is stepping up its efforts to reduce food waste
  5. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  6. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA

Join EUobserver

EU news that matters

Join us