Brussels, 12/07/2011 (Agence Europe) - On Monday 11 July the commissioner for taxation and customs union, Algirdas Šemeta, answered questions put to him by MEPs in the European Parliament's economic and financial affairs committee which met under the chairmanship of Astrid Lulling (EPP, Luxembourg). The exchange of views focused almost exclusively on the new financial transaction tax (FTT), which the Commission is proposing to introduce as a future own resource of the EU within the next financial framework for 2014-2020 (EUROPE 10409).
The formal proposal for this tax is due to be presented in the autumn by the Commission. It will apply to all monetary and financial transactions, which have rates that vary between 0.01% for derivative products and 0.1% for shares and bonds. It is expected to bring between €31.5 billion and €54 billion into the coffers of the European Union and will subsequently reduce European budget dependency on member states' contributions while at the same time reducing the latter's contributions. It is aimed at: - harmonising measures that already exist in 10 member states at a European level, thus preventing internal market fragmentation as far as financial services are concerned; - discouraging or limiting speculation; - and ensuring that a contribution is made by the financial sector to the costs induced by the crisis.
The first salvo of questions from MEPs particularly focused on: - the reasons for a differentiation of rates between different products, certain MEPs considering that taxes on derivative products should be higher; - possible tax exemptions; - the possibility of creating own resources in the current period; - the legal basis for introducing own resources; - and the timetable for application.
The commissioner firstly pointed out that the rates indicated for the time being are only indicative and that it would in any case only be a question of minimum rates, with member states being free to set higher rates if they wish. He then pointed out that the rates had been devised in an effort to prevent corporate relocations and fraud as much as possible. In this regard he indicated that the tax would only apply to bodies active on the monetary and financial markets, and he pointed out that 85% of financial transactions are made between institutions, with transactions above all being carried out online. Citizens would therefore not be affected and the Commission would attempt to ensure that the tax would not be shifted from those subject to it to other parties. In the context of the implementation deadline, the commissioner indicated that it would be defined in the proposal that the Commission will be presenting in the autumn.
Šemeta sought to defend the tax and affirmed that it would alleviate contributions made by member states, allowing them to dedicate their released resources to their respective deficit reductions. Lulling was obviously not convinced by this argument and speaking as an MEP (and not as the chair of the committee) she asked from where the €200 billion in income mentioned by certain speakers would come. According to Lulling, the tax applied by the EU to financial bodies would compel member states to reduce their taxes on banks and consequently they would see reduced fiscal revenue. In any case, Lulling said, this tax will never see the light of day, as a money expert had confirmed it to her.
Other MEPs said that this tax was for the time being exclusively European and that the Commission should take up the challenge with regard to its subsequent application in the rest of the world. What is going to happen, however, if the US and Asia do not follow suit? Would there be a boomerang effect? What would be the line advocated by the Council and the opposition from financial centres such as the United Kingdom? Who would be the first to be penalised by the tax? Serious reservations were expressed by the president of the ECB, Jean-Claude Trichet, with regard to the introduction of such a tax, particularly in this period of crisis (EUROPE 10409).
In response to these questions the commissioner chose not to provide a comprehensive answer and focused on the fact that the paradox was such that a tax of this kind was already being applied in the United Kingdom itself (which is also applying a tax on derivatives) and even in Switzerland. These two countries, however, still remain important financial centres and they have not suffered from these taxes, far from it. This argument could be extrapolated to other financial centres in the world and hopefully lead to a tax being introduced internationally. The president of the ECB did not say that the FTT was impossible to introduce but underlined the need for caution, particularly in the context of what rates should be applied, explained Šemeta, who indicated that if the tax is introduced at a global level, rates could be increased. With regard to unanimity at the Council, the commissioner highlighted the importance of pressure being exerted by the EP and citizens, 61% of whom support the FTT, according to polls carried out. The environment is therefore positive and it is the right time to go forward with this project.
Finally, with regard to ways of introducing the tax (in a centralised or decentralised way), the commissioner referred to tax direct debits, which would allow taxes to be deducted in the country where the institution has its operational headquarters located. This would therefore mean that for an Austrian bank operating in the United Kingdom, the tax corresponding to these operations could be collected in Austria. (F.G./transl.fl)