Milan, 15/09/2014 (Agence Europe) - Finance ministers from 11 member states (Germany, France, Belgium, Austria, Slovenia, Portugal, Greece, Slovakia, Italy, Spain and Estonia) that are party to the Financial Transaction Tax (FTT) are keen to stick to the deadlines set out for reaching an agreement on the technical outlines of the first application phase for this tax on 1 January 2016.
On Friday 12 September, in the context of the informal Ecofin Council, they organised a meeting, described as productive by France. The speeches by ministers as they left, however, demonstrated that a lot of work still needed to be done.
Michel Sapin, the French Minister for Finance explained on Saturday that “if we simply had the target amounts, then we would just be talking about increasing taxes”. He added that it was important not to lose sight of the fact that those who set up the FTT wanted to introduce a few grains of sand to slow down certain transactions that could lead to destabilisation. “FTT has to be able to help us fight against poor financial practices”. In an interview with Bloomberg, the new Austrian Minister for Finance, Hans Joerg Schelling, defended a position that was somewhat opposed and argued, “I won't be part of a fig-leaf tax announced for political reasons to counter evil speculators”. “If the overhead for banks, companies and stock buyers is bigger than the outcome, the tax “doesn't make sense”, he argued.
With regard to the action, two questions came to the fore: Firstly, what kind of shares needed to be taxed? Luis De Guindos, the Spanish Minister for Finance also asked how they should tackle shares from companies that are not quoted on the stock market. Secondly, in what conditions should shares be taxed? Sapin explained that the 11 countries mentioned above were working to find a solution so that the smallest countries that took part were not penalised.
Last May, Slovenia highlighted a number of misgivings it harboured, and argued that rather than applying a tax to a broad tax band, it would be better to have a lower rate that was easier to administer. The Slovenian Prime Minister explained to the country's parliament that the project being advocated was going in the opposite direction.
De Guindos said that the main principle would be the one from the country issuing the share: the tax applied for transactions carried out by an institution that had its headquarters in the country advocating strengthened cooperation. This basic principle will also be accompanied by taking into account the principle of residency, precisely for compensating the problems encountered by small countries with limited markets.
What derivatives should be included in the scope for applying the tax? Sapin highlighted the disincentive quality of the future FTT and said it was necessary to identify derivatives that created the most risks. Schelling expressed criticism of countries that sought to exclude from the scope of application products that are not speculative and asked how banks would be able to distinguish between speculative and non-speculative derivatives. Greece believes that it is important to identify those responsible for speculating in sovereign debt derivatives because their taxation affected liquidity. The Paris stock market is in a very advanced position on the derived products market and is still against taxing these products, but certain sources say that the country is taking a less hard line on this matter. In July, however, Sapin repeated his opposition to them being included in the application of this tax.
German optimism does not appear to have suffered even though it has toned down its goals. On Friday the minister, Wolfgang Schaüble stated, “I am optimistic because I believe that if we take his first step, we will create an effect that will lead to further steps that encourage other countries to join us”. He added that the situation varied according to each country and that the first step was obviously a modest one. Schelling expressed doubt about the timetable and warned, “if we don't have a solution by the end of the year, we won't be able to implement this in time. It's pure speculation whether we'll succeed”. Sapin said that he was convinced an agreement would be found by the end of 2014. The next technical meeting will be on 25 September. (EL and MB)