Tuesday

24th Nov 2020

Ministers edge closer to agreeing transactions tax

  • The tax is expected to generate only "modest" revenue (Photo: Ken Teegardin)

Eleven EU finance ministers edged closer to agreeing a tax on financial transactions at a meeting on Friday (7 November).

At a press conference following the monthly meeting of EU finance ministers on Friday (7 November), Italian minister Pietro Carlo Padoan, whose country holds the EU's six month rotating presidency, told reporters that there had been "good progress in both the criteria and the identification of items that would be subject to the tax".

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Padoan commented that ministers had "agreed on the scope of taxation, which looks at shares first and then looks at taxation of some derivatives,” but conceded that "discussion is still ongoing".

"Good progress is now being made towards an agreement by the end of the year, which would allow the FTT to enter into force by the beginning of 2016," said EU economic affairs commissioner Pierre Moscovici at the press conference.

Talks on the introduction of a financial transactions tax (FTT) were a constant feature in the 2009-14 legislative term. The European Parliament became the spearhead of a campaign arguing that the levy would result in the financial sector paying its share towards the cost of the financial crisis. Campaigners also argued that the FTT would dampen speculation in financial markets.

Critics say that previous experiments with transactions taxes, such as in Sweden during the 1980s, damaged the financial sector by driving traders to other jurisdictions without creating much revenue.

But the tax quickly became more about symbolism than as a levy that would rake in significant sums to national treasuries. After an attempt to impose the tax across all 28 EU countries collapsed in 2012 following opposition from a group of countries, eleven countries agreed to work towards establishing a tax under enhanced co-operation in early 2013. Since then, however, ministers have been bogged down in the detail of which products should be subjected to the regime and on the tax rate.

France and Germany have been the main driving forces behind the FTT but both favour limiting the number of products that are taxed. The likes of Austria favour subjecting most financial products to the tax.

Meanwhile, the UK has been among the leading opponents to the levy, submitting a legal challenge to the European Court of Justice in opposition to provisions that would require its firms to pay the tax every time they did business with firms in the eurozone-11

The Commission believes that its proposal, which includes a 0.1 percent levy on bonds and shares and 0.01 percent on derivative products, would raise €30-35 billion in revenue per year across the 11 countries involved but the levy eventually adopted is likely to raise only a fraction of this.

German finance minister Wolfgang Schaeuble admitted that the tax was largely symbolic and revenue generated would be “very modest”.

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Ten EU countries agreed Tuesday on "core principles" to tax financial transactions, but real discussion was delayed and the UK threatened court action if the tax goes against its interests.

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