Brussels, 04/11/2014 (Agence Europe) - Not with new proposals, but with a proactive attitude, the French finance minister, Michel Sapin, will arrive at the Ecofin meeting on Friday 7 November, to discuss the financial transactions tax (FTT). In an open letter entitled “Let's Stop Dithering”, which was published by the newspaper Les Échos on Tuesday 4 November, Sapin clarified the French position (our translation throughout).
Laying emphasis on the precedent the FTT will set in terms of enhanced cooperation in taxation matters, Sapin said that the last six months have “allowed a good deal of progress to be made and an agreement is now within reach, if everybody takes their responsibilities”. Anyone who has been following the discussions closely, however, will recognise that the lines have shifted very little since May of this year.
The French minister's article comes at a time when, at last Thursday's Coreper meeting, several of the states which have signed up to the FTT expressed concern at the fact that the document of the Italian Presidency of the Council, which is to be presented to the ministers at Ecofin, called upon them to “resolve the questions” raised in the said document. It was therefore agreed that the Presidency would not invite Ecofin to find solutions, but to provide indications as to its preferred path to resolve these issues (see EUROPE 11188).
Sapin wrote of his intention to turn up at the Ecofin meeting with “concrete proposals”. The ones he then put forward largely reflect the contents of the document to be presented by the Presidency to the ministers on Friday (see EUROPE 11180 and EUROPE 11186). On the scope of application of the taxation of shares, he argued in favour of taxing transactions on listed shares and leaving the member states the option of taxing unlisted shares if they so decide.
As regards the scope of application of the taxation of derivatives, Sapin says credit default swaps should be taxed. “These transactions are purely speculative and dangerous”, he writes.
As he did in Milan in September, he stressed that the underlying principle of the FTT must be to “effectively put the brakes on transactions which are dangerous to the real economy. Considerations of yield are secondary to this principle”. This position is diametrically opposed to that of Austria, which recently said that it did not want a tax which had been “announced for political reasons to counter bad speculators”. If the general costs to banks, business and buyers of shares are higher than the yield, then the tax “is pointless”, argued the Austrian minister, Hans Joerg Schelling (see EUROPE 11155). “From the beginning, I have set myself one objective: finally implementing a tax which preserves and protects good finance and the funding of our economic fabric, whilst making a significant contribution to the funding of shares to promote development”, he added.
On the principle of taxation, as France has already indicated on a number of occasions, Sapin said that the principle of the state of issuance should be used (financial instruments issued in the 11 states belonging to the FTT will be taxed where they are sold, even if the parties are not established in the FTT zone). This, he believes, is the only solution “which does not allow the tax base to vanish”, as experience has shown.
The smaller states, which fear that they will be disadvantaged in terms of revenue, would rather go with the principle of the state of residence of the institution carrying out the transaction. Nonetheless, echoing the Presidency, Sapin proposes applying the “principle of issuance to determine the tax base and applying the principle of residence to determine the state which is the beneficiary of the tax raised”.
The FTT states (Belgium, Slovenia, Greece, Italy, France, Germany, Austria, Spain, Estonia, Portugal and Slovenia) pledged in May to agree on the outlines of the first application phase of the FTT by the end of this year. This initial phase will therefore start on 1 January 2016. (EL)