Brussels, 8/11/2011 (Agence Europe) - There are great reservations among many member states, including the United Kingdom and Sweden, about the wisdom of the European Union going it alone in introducing a financial transactions tax (FTT) (see EUROPE 10490), but EU27 representatives agreed at the ECOFIN Council on Tuesday 8 November, with the Polish Presidency's suggestion that technical work should continue in working groups on 5 December 2011 to limit the potential negative impact for the EU economy and the European financial industry, on the European Commission's draft directive on introducing an FTT in Europe on 1 January 2014.
As EU Taxation Commissioner Algirdas Semeta pointed out, the directive has several objectives: - ensuring the financial industry pays more towards the costs of the economic crisis because it is not subject to VAT and it is hoped the tax will force it to refrain from abusive speculation and encourage it to focus on the real economy; - boosting public finances through the income from the tax going into the EU budget to be used for growth-generating expenditure, development aid or tackling climate change; - reducing economic disparities by redistributing wealth; - creating a harmonised EU system for taxing the financial industry to avoid creating an uneven playing field. The European Union is trying to get the tax accepted globally, he explained, and by introducing it in the EU first, it would be sending a strong signal to the rest of the world at a time when some of them are showing willingness to agree to such a tax at global level.
These aims, and the Commission's promotion of the idea internationally, are strongly supported by France, Germany, Belgium, Spain, Finland and Greece. The French finance minister, François Baroin, said that at the G20 in Cannes, the United States had said for the first time that it could consider an FTT at global level. Baroin suggested that the debate should leave aside the question of how the income should be spent for the moment because this was a political question that would hamper work on the details. This idea was shared by the Belgian finance minister Didier Reynders, who suggested that the debate should focus on what the tax would be levied on and how high it should be, along with the feasibility of introducing it in the EU as a whole or, failing that, seeing which countries would be prepared to consider it. Like the German finance minister, and unlike countries that oppose the tax, he said that the financial industry should be forced to fork out, like all other industries. Why should the financial industry get special treatment and why should it be dangerous to tax finance?, asked Reynders, especially since water, which is crucial to life, is taxed. The German finance minister Wolfgang Schäuble took a much stronger line, saying that ordinary people expected a strong and fast decision to be made and the markets must not be allowed to set the rules. Instead, he said, it is high time that the financial industry be forced to follow the rules. In this sense, the FTT tackles the trend in the financial industry to see itself as separate from the real economy and will help focus cash where it is needed in the real economy, which is so important for countries like Germany. Waiting for an FTT at global level or claiming that banking is different to delay introduction of an FTT in Europe are just excuses for sitting on one's hands and doing nothing, explained the German minister. Spain's finance minister was the most enthusiastic, saying she was she certain she would see an FTT in her lifetime.
Other countries, headed by the United Kingdom and Sweden, said they were strongly opposed to the tax because it would undermine the competitiveness of the financial industry in Europe and generate a real risk of financial companies upping sticks and leaving the EU, taking jobs and wealth with them. The main attack came from Sweden's finance minister, Anders Borg, who said that the FTT that had been designed was the most damaging way that could possibly have been invented. He said the Commission had seriously underestimated the cost for the economy and the impact on GDP and had overestimated the potential income. Such a tax would reduce the turnover in the secondary market and be an additional burden at a time when banks are asked to shore up their reserves. The British finance minister George Osborne said a tax on bank profits would be much better and he made similar criticisms of the Commission's figures. He said that an FTT would not actually be paid by the banks themselves, but by their customers and pensioners because an FTT would increase the costs of managing pension funds. He said that in any case, with the clear lack of unanimity on the issue (he said two-thirds of delegations opposed it), it would have to be mothballed rather than wasting any more time on it. The United Kingdom already levies an FTT at home and is in favour of an international FTT. Most new member states (the Czech Republic, Latvia and Bulgaria) shared these criticisms. Italy fears the impact of the tax on its debt and expressed great reservations. Doubts were also expressed by Ireland, Denmark and Luxembourg, which are concerned about who would really end up paying the tax and how much it would actually raise. The Netherlands said it had no opinion, but asked the same questions about companies relocating and how the tax would affect pensioners. The Polish Presidency summed up by saying that opinion was very divided and it would be difficult to work out the practical details. (FG/transl.fl)