Brussels, 27/09/2011 (Agence Europe) - On Tuesday 27 September, the European Commission was due to have its last formal discussion ahead of publication over the next few days of draft legislation to introduce a financial transaction tax (FTT) in 2014 on transactions to and from institutions registered in the EU (see EUROPE 10458). Despite opposition in the ranks of European commissioners (Catherine Ashton and Karel De Gucht in particular), the formal draft will probably be discussed at the ECOFIN Council in Luxembourg on 4 October to decide on the EU's approach to levying an FTT at global level and arguing the case for this at international bodies.
This will be the first step in tough and no-doubt lengthy horse-trading among member states and it is far from clear whether the tax will come into force in 2014 in the European Union as a whole or only in the eurozone or some other combination of countries under enhanced cooperation. There is strong opposition to the idea and the EU is divided between a group of countries headed by France and Germany, backed by Italy, Spain, Poland, Belgium and Finland, which support the new tax, and countries like the United Kingdom, Sweden, Malta and the Netherlands, which fear that the EU going it alone and introducing such a tax ahead of the rest of the world would damage the City of London and other European financial centres by leading to a mass exodus of financial firms out of the EU, particularly because the EU's partners on the G20, headed by the United States, all oppose the levying of such a tax on financial transactions at global level.
The Commission has decided to press ahead, backed by research that suggests that as long as it is small enough, the tax would not have much of an impact on the attraction of European financial centres. The basic idea is to levy it on as broad a range of transactions as possible, like currency exchange, stocks and shares, bonds, derivatives and structured financial products at a very low rate (such as 0.1% on stocks, shares and bonds and 0.01% on derivatives), and not levying it on transactions by private individuals, the issuing of stocks and shares and some currency deals. The rates suggested are said to be the lowest that the member states would be prepared to introduce.
The Commission is planning to hammer speculation and high frequency trading to squeeze the financial sector, which has beneficial tax treatment within the EU, not having to charge VAT, for example, using the revenue collected to feed the EU's coffers and reduce member states' contributions to the budget accordingly. Once up and running, it is expected that an FTT could raise between €30bn and €50bn a year. (F.G./transl.fl)