Luxembourg/Brussels, 14/09/2015 (Agence Europe) - On Monday 14 September, the European Bank Federation (EBF) expressed stiff opposition to the financial transactions tax (FTT) now that public debate got the ball rolling again in Luxembourg on Saturday 12 September (see EUROPE 11386).
“The introduction of an FTT sends a confusing message to people and markets in a time that Europe urgently needs more initiatives for growth, like the Capital Markets Union (CMU). CMU is about boosting liquidity and financing for companies. All these benefits may evaporate as soon as the EU begins to tax financial transactions,” said Wim Mijs, EBF chief executive.
After a meeting of finance ministers of the eleven countries wanting to introduce an FTT, on Saturday 12 September Taxation Commissioner Pierre Moscovici said there had been “Progress concerning the scope, and also about functioning or governance. We are now close to agreement on the core engine of what could be. (…) Everybody agrees on the priniciples; at the next meeting (in October, Ed.) I hope we can find an agreement and then find a deal on other points (rates, use and so on).”
The eleven countries decided not to publish a common statement. Some sources say that work didn't go far enough for that, while others says that Greece couldn't make any commitmments because it only has a caretaker government.
Austrian finance minister Hans Jorg Schelling said: “We've agreed on a model that we will continue to work with. (…) We're hoping that we can then take that forward to the next Ecofin in October to find further compromise.”
French finance minister Michel Sapin listed the points that he said the eleven nations would not go back on, which are broadly those included in a compromise drawn up by Austria in June (Austria is piloting the ministerial discussions, see EUROPE 11354). Gross rather than net transactions would be taxed, for example. Sapin said this meant that speculative transactions such as high-frequency trading will be covered by the FTT. Intra-day transactions will also be covered, he added, explaining that the only exception for derivatives would be products used to finance sovereign debt.
He did not give any details of what had been agreed, but the Presidency was proposing to tax shares by combining residency and issuance, but only for securities issued in the FTT application zone.
On the concerns raised earlier in the week by Belgium (see EUROPE 11385 and 11386), Sapin said that the ministers had taken note of them and work would be carried out at technical level to deal with them. A second source confirmed this. Belgium wants exemptions for life-insurance funds, which Germany would support. France is not greatly in favour of this, commented Sapin.
If agreement in principle is reached in October, agreement will still be needed on tax rates and what to do with the income. The tax rates are likely to be low, given the sheer number of transactions involved. German newspaper Die Welt says that ministers are considering using a mechanism to distribute proceeds to compensate states that would have to invest more to collect the tax than they could generate from it. Several participants said that distribution would not be negotiated until October, in the best case scenario, with the hope of agreement being reached by the end of the year.
Sapin said the European Commission says it would take nine months from the decision being taken to be able to levy the tax.
In recent months, the talk was more about agreeing on a modest first phase of application of the FTT (only taxing shares, for example) in order to facilitate the debate. The French minister, however, feels that they could start with the full FTT because the idea of a phase-in was simply to facilitate talks and the talks have now almost reached conclusion.
At the European Commission, people point out, however, that implementation has not been discussed. Since the tax will apply to so many transactions, it is not to be assumed that the FTT will be levied across the board right from the start. (Elodie Lamer)