Copenhagen, 02/04/2012 (Agence Europe) - The official line that EU27 agreement on the European Commission's plans to introduce a financial transaction tax (FTT) will take time is a euphemism and German Finance Minister Wolfgang Schäuble has therefore suggested to his colleagues that a two-stage approach would be suitable for what Germany describes as “crucial” legislation. National FTTs could be introduced and levied in the country where companies have their headquarters while talks continue at EU level for as wide and ambitious an FTT as possible in the EU, which should also be levied on bonds and derivatives deals.
Speaking after the ECOFIN Council in Copenhagen, Schäuble said he hadn't abandoned hope of an FTT being introduced. “We agreed that if we maybe don't reach the perfect solution of a broad financial transaction tax at a European level, because we need a unanimous decision for that, we should ... intensively look at a working group”, Schaüble added. The German government is under pressure from the opposition to take determined action in favour of an FTT, in return for support from the Left for ratification of treaties introducing the budget pact and the European stability mechanism.
According to Danish Economy Minister Margrethe Vestager, “the most constructive atmosphere is found on alternative proposals”. She mentioned the activity tax of 10.5% on financial activities in Denmark to compensate for the fact that there is no VAT on financial services. French Economy Minister François Baroin described Germany's suggestion as “wise”, because progress has to be made and France wants as many national FTTs as possible (France will soon be introducing one) before a balanced EU directive is introduced. EU Taxation Commissioner Algirdas Semeta said Germany's idea would make a constructive contribution to the debate by keeping the Commission's approach of the option of an EU27 tax.
The countries most opposed to the Commission's initial ideal, Denmark, the Netherlands, the United Kingdom and Sweden, want alternatives to be sought. “We think it would be a good idea if the Commission's proposal was taken off the agenda. A financial transaction tax model that imitates the French stamp duty looks far more appetising than the Commission's proposal. The stamp duty model in France and the UK is less costly for the economy and would not have a detrimental effect on the financial market”, said Swedish Minister Anders Borg, unhappy about an FTT or any other tax to raise income for the EU. In September 2011, the Commission recommended levying a 0.1% tax on share transactions and 0.01% on derivatives deals, which it says could raise €57 billion and therefore reduce member states' bill to the EU by €54 billion (see EUROPE 10581).
Germany says an FTT should be accompanied by strict regulation of the financial markets. The recent introduction of an EU system for derivatives will increase transparency and reduce the counterparty risk (see EUROPE 10585). Berlin believes that the current revision of the MiFID II legislation will regulate the platforms on which standard derivatives are dealt. Asked whether derivatives deals should be taxed, Vestager said that EU27 financial ministers' views were not clear on this issue. The Social Democrats at the European Parliament regret the backtracking by finance ministers on the Commission's initial ideas. “Those tax models that are now being discussed will fall far behind the FTT both from the demand and control side. Only a real FTT will allow us to slow down and in the long-term prevent extremely speculative and often high speed implemented financial transactions”, said Hannes Swoboda (S&D, Austria). (MB/transl.fl)