Tuesday

26th Jul 2016

Ministers near deal on 'step-by-step' transactions tax

  • Schaueble - transactions tax can be implemented 'step-by-step' from 2016 (Photo: consilium.europa.eu)

Ministers anxious to bring in a tax on financial transactions are hoping to secure a political deal introducing a levy in 2016, in talks planned on Tuesday (6 May).

A document outlining plans for the tax's gradual introduction in 2016 is expected to be presented to the rest of the EU's 28 finance ministers later today, Reuters reports.

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“We know that we can only proceed step by step,” German Finance Minister Wolfgang Schaeuble said in Brussels on Monday. “The possibilities, the situations and the interests of the individual participating states are so different that only a limited taxation of shares and some derivatives is possible in a first step.”

"I want a political commitment that we jointly want this financial transaction tax and which timeframe we envision for it," said Austria's Michael Spindelegger. "Whether we will achieve that, we'll see."

Other EU countries, with the UK being the most vocal critic of the tax plan, have complained that the so-called "residence" and "issuance" principle in the proposed bill means that traders operating outside the FTT-11 would still be liable to pay the levy.

The UK, which has the largest financial services sector in the EU, says that it could be hit by the tax to the tune of £5 billion per year (€6 billion) as a result.

The proposal currently on the table includes a 0.1 percent levy on bonds and shares and 0.01 percent on derivative products.

France and Germany, together with nine other eurozone countries, have led support for the tax, often called the 'Robin Hood tax' by supporters, and want to have a political agreement for its introduction before the European elections later this month.

Talks between EU politicians on the possible merits and structure of a transactions tax have been a regular feature during the 2009-14 legislative term. The FTT-11 agreed to proceed with a tax using the EU's "enhanced co-operation" procedure in February 2013 after it became clear that a pan-EU regime would be vetoed by several countries.

Although supporters of a transactions tax see it as a way to make the financial sector pay towards the costs caused by the 2008-9 financial crisis and to curb speculation, in reality, the tax is more about political symbolism.

The tax rates proposed are too low to curb market behaviour, while the €30-35 billion in revenue which the European Commission estimates would be raised each year across the 11 countries involved, would be much lower than campaigners had hoped for.

Ministers from the eleven countries which support plans to establish the tax met in Brussels on Monday following a gathering of the 18 finance ministers of countries in the eurozone.

As expected, Portugal announced that it would not be requesting a temporary credit line or any further financial help when its three year €78 billion bailout programme concludes this month.

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