Sunday

3rd Jul 2022

Group-of-11 gets go ahead for financial transaction tax

  • Commission - FTT could raise €57bn each year (Photo: stefan)

A European tax on financial transactions has moved a step closer to reality after EU finance ministers gave the go-ahead for 11 countries to put it into law.

Ministers at the Ecofin meeting in Brussels on Tuesday (22 January) formally gave consent for the group, marking only the third time the EU's voting procedure has been used to allow a group of countries to press ahead with a special project, joining divorce law and the recently established European patent court.

Read and decide

Join EUobserver today

Become an expert on Europe

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

... or subscribe as a group

A minimum of nine countries is needed to request the so-called enhanced co-operation procedure.

The European Commission initially proposed an EU-level FTT for all 27 member states in 2011, but the idea was withdrawn after a number of countries led by the UK, Sweden and the Netherlands, refused to back it.

However, the 11 FTT countries - Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia - wrote to the commission in autumn 2011, urging the EU executive to re-submit its original proposal to them.

In an impact assessment on the levy, the commission estimated the group-of-11 FTT could raise €57 billion per year which could be deducted from national contributions to the EU budget.

In practice, national ministers are expected to insist that they keep control of all revenues.

The tax is expected to be set at a rate of 0.1 percent of bond sales and 0.01 percent on financial derivatives, many of which are bought and sold through high frequency trading based on algorithms.

Supporters claim that the tax will ensure that financial institutions pay their bit towards the costs of the economic crisis.

Critics say the financial sector will simply increase customer costs to offset the payments they have to make, and pointed to the commission's own assessment the FTT could result in a 1 percent reduction in EU GDP, roughly equivalent to €50 billion.

EU taxation commissioner Algirdas Semeta described the step as a "milestone for EU tax policy" on Tuesday, adding that "a block representing around two-thirds of EU GDP will implement this fair tax together, answering the long-time calls of their citizens."

The European Parliament, which adopted its own opinion on the FTT, also supports the proposal.

Greek centre-left MEP Anni Podimata, who drafted parliament's position on the tax, said that it would "discourage the most speculative and risky transactions."

French MEP Jean-Paul Gauzes, who speaks for the centre-right EPP group on the economic affairs committee, added that "it is major importance that the financial sector contributes, as any other economic sector, to the collective effort to grow out of the crisis."

For her part, Green group spokesperson Emilie Turunen called on the FTT to include an "issuance principle," whereby financial institutions located outside of the participating states would also be obliged to pay the FTT if they traded securities originally issued within the EU, arguing that this could make it "a truly European financial transaction tax."

However, the current proposal stipulates that the tax would be paid according to the "residence principle," meaning that it would be levied in the country where the financial institution making the trade is based rather than where the transaction was carried out.

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.

News in Brief

  1. EU Parliament 'photographs protesting interpreters'
  2. Poland still failing to meet EU judicial criteria
  3. Report: Polish president fishing for UN job
  4. Auditors raise alarm on EU Commission use of consultants
  5. Kaliningrad talks needed with Russia, says Polish PM
  6. Report: EU to curb state-backed foreign takeovers
  7. EU announces trade deal with New Zealand
  8. Russia threatens Norway over goods transit

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic and Canadian ministers join forces to combat harmful content online
  2. Nordic Council of MinistersNordic ministers write to EU about new food labelling
  3. Nordic Council of MinistersEmerging journalists from the Nordics and Canada report the facts of the climate crisis
  4. Council of the EUEU: new rules on corporate sustainability reporting
  5. Nordic Council of MinistersNordic ministers for culture: Protect Ukraine’s cultural heritage!
  6. Reuters InstituteDigital News Report 2022

Latest News

  1. Nato's Madrid summit — key takeaways
  2. Czech presidency to fortify EU embrace of Ukraine
  3. Covid-profiting super rich should fight hunger, says UN food chief
  4. EU pollution and cancer — it doesn't have to be this way
  5. Israel smeared Palestinian activists, EU admits
  6. MEPs boycott awards over controversial sponsorship
  7. If Russia collapses — which states will break away?
  8. EU Parliament interpreters stage strike

Join EUobserver

Support quality EU news

Join us