Brussels, 07/10/2011 (Agence Europe) - On Thursday 6 October, Commissioner for Taxation Algirdas Semeta answered questions and objections from the MEPs of the committee on economic affairs of the EP, one week after the Commission's proposals on the introduction of a financial transaction tax were presented (FTT - for the details, see EUROPE 10462) at the level of the EU27.
This tax, which could generate €57 billion a year to be divided between the budget of the EU and those of the member states, is a “prerequisite” of the proposal currently being drafted on introducing new own resources of the EU, the commissioner said. In this way, it will help to reduce the contributions of the member states to the European budget whilst harmonising similar measures already in force in certain member states. It is a response to the strong expectations of the citizens for a greater contribution to public funding from the financial sector, which the member states have spent €4.6 trillion on shoring up since the outbreak of the crisis. It also aims to reduce risky practices by discouraging such things as “high-frequency transactions” carried out over the computer and “netting”, which make up respectively 40% and 18% of all transactions and are not “healthy activities” of the sector, he said. This would oblige businesses to rethink this negotiation model and may even encourage them to create jobs to do this, Semeta added. Lastly, he said that the introduction of the tax would put Europe in a leading position globally and give it arguments to defend a tax of this kind at international level, as early as at the forthcoming meeting of the G20 next November, adding that the Commission was still working on the tax.
In response to Kay Swinburne (ECR, United Kingdom), who warned of the negative effects of the FTT on the City of London and the danger of the relocation of certain financial activities, particularly on derivatives, the commissioner explained that relocation would be minimal, as the tax regimes alone are not enough to determine where the activities are carried out. Additionally, relocation brings costs greater than those caused by the tax. He added that relocation could also be limited by combining the tax with other measures.
Other MEPs asked how the tax could be set in place if there is not unanimity at the Council and, if not, whether the tax could be a subject for enhanced cooperation, or be limited to the eurozone alone. If so, how could a differentiated impact be avoided between the European centres outside the zone of application of the tax and those inside it, many of which are smaller. Semeta replied that his proposal aimed to bring in the tax at the level of the EU as a whole and that the tax would bring advantages in terms of revenue even to countries not in favour, such as the United Kingdom, which itself already applies a similar tax. It is too early to think about introducing it to a limited number of countries or just the eurozone, but if certain member states decided not to be involved, the tax would be imposed on all institutions with their headquarters in the participating countries, which would mean that their activities outside it would also be taxed.
Lastly, other questions were raised about the way the revenue would be divided between the budget of the EU and the national budgets and on the division of the tax burden between institutional investors (pension funds and others) and the investment banks. On the first issue, the commissioner replied that it was still too early to talk about how the revenue would be divided up, but that he was working on that point in close cooperation with the budget commissioner. As for the division of the tax burden between investors, he said that he believed that pension funds, as less intensive users of financial transactions, would be less affected by the tax. However, he spoke of the need to fight the development of exemptions which could lead to certain institutions getting round the tax.
The debate saw a weighty accusation levelled by Philippe Lamberts (Greens/EFA, Belgium) against those who, in the very premises of the EP, oppose the tax. The MEP accused them of defending not the common good, but “the interests of a few thousand people getting rich on the back of the crisis”.
The committee's next interview with Semeta is scheduled for the first quarter of 2012. (FG/transl.fl)