Brussels, 07/11/2014 (Agence Europe) - On Friday 7 November, the Italian Presidency of the EU Council of Ministers boasted that a compromise was emerging among the eleven countries involved in introducing a financial transactions tax (FTT). They are still negotiating over how the tax would operate and are exploring two options, but member states not involved in the FTT say that only one option is possible.
“Agreement should take account of the Council's legal service's view that the residence principle if not compatible with EU law,” explained Danish finance minister Morten Ostergaard in a public debate at the Ecofin Council on 7 November. He added that the FTT “should rest on a solid basis and rely on the issuance principle.” He was backed by the Netherlands and Luxembourg.
What is at stake depends of course on whether countries are within or outside the FTT. The first are split between large countries that back the issuance principle and small countries that fear being penalised if the residence principle (initially proposed by the Commission) is not used. Small countries are under increasing pressure from Italy and France to back the issuance prinicple (already introduced by the two countries) and Austria and Slovenia have recently threatened to walk out of the enhanced cooperation mechanism for the FTT entirely.
Countries outside the FTT are worried about how the tax will impact on their own markets. Dutch finance minister Jeroen Dijsselbloem said: “It is crucial that the European Commission is ready to take very seriously into consideration EU law and the effect of the FTT on the European Community as a whole.” Luxembourg echoed this. On behalf of the Presidency of the Council of the EU, Italian finance minister Pier Carlo Padoan said that the option was currently being explored of combining the two principles to ensure a fair sharing of income. He said progress was also being made on the scope of application of the first phase of the FTT, in other words, on shares and some derivatives, where agreement was reached in May. Talks on derivatives will continue, he explained, adding that he was confident that the talks could be concluded before the end of the year.
Modest agreement possible before deadline. Austrian finance minister Hans Jörg Schelling said: “Thanks to the Presidency, we were able yesterday to bring in a new proposal to restart the discussion with a compromise,” and hoped everything will be settled by the end of year. At a press conference, quoted by the Wall Street Journal, Schelling said agreement had been reached on the fact that most financial instruments would be taxed apart from sovereign bonds and that a lower rate of tax would be levied. After the meeting, however, a diplomat commented that these positive statements were all a lot of hot air.
French finance minister Michel Sapin had to leave the meeting before the FTT debate. He said he had made proposals that some considered the bare minimum, but he said the greatest danger for the FTT was for it not to be introduced. He said some were demanding a lot in order to prevent the tax from materialising and some were asking for a lot as a matter of strong belief. He said his proposal for derivatives was to tax the most dangerous deals, but there could be other proposals. Sapin recently called for credit default swaps to be taxed.
France and Germany agree that at least the first step needs to be made. 'The outcome will be very modest,” warned German finance minister Wolfgang Schäuble during the debate. He drew a parallel with the FATCA agreements in the United States that acted as a catalyst for global talks on the automatic exchange of bank information, that 51 countries have signed up to for 2017, although the EU has been in deadlock on the subject for years now. Schäuble's idea for the FTT is to give the “momentum to encourage all of you to join.”
The eleven countries said they aimed to agree on the first phase of the FTT before the end of the year. On behalf of the European Commission, Taxation Commissioner Pierre Moscovici said he would prefer matters to be settled under the Italian Presidency. (EL)