Brussels, 08/12/2015 (Agence Europe) - Press on, despite everything. This is the commitment reiterated by the finance ministers of the states participating in the financial transactions tax (FTT), with the exception of Estonia, which has left the group.
The 10 other participating states have therefore published a joint statement detailing the points of the discussion which are closed and on which no more work needs to be done. These points lay down the characteristics of a future FTT. There is not much new in this statement and the points which were open after the last meeting of the ministers, if not the one before, are still open. On the points on which there is consensus, these come in for a certain amount of criticism from countries not participating in the FTT.
It is hard to say whether some crazy hope has inspired the ministers, because in spite of the absence of any visible progress in recent months, the states nonetheless reiterated a political commitment to continue the work. The Austrian finance minister, Hans Joerg Schelling, who is leading the discussions, said last month that if there is no agreement by the end of the year (the deadline set by the Eleven), discussions must continue “just as openly, due to the fact that no decision can be reached” (see EUROPE 11428). A number of observers are putting the continuation of the work down to the climate negotiations underway in Paris, at COP 21. It would not be in good political taste to abandon the work in the middle of COP 21, as the idea has been mooted, particularly in France, that the income from the FTT could be channelled into the fight against climate change.
The declaration of the Ten therefore states that as regards shares, a “narrow exemption for market-making activities could be required”. Several similar exemptions are applicable to the national FTTs or similar regimes in France, Italy, Belgium and Greece, but this is not provided for by the Commission's proposal.
The question of the location for the shares is rumoured to be what prompted the Estonians to withdraw (temporarily?). Although the Estonian minister told the public debate that he did not have the necessary mandate, he went on to say that he could not adopt the tax as proposed at this stage. According to a source close to the negotiations, Estonia stressed that if the cumulative application of the principles of residence and of issuance was used just for the shares of the Eleven, it would be able to collect just 20% of the potential revenue. The enhanced cooperation is moving towards allowing the states to go further if they wish, but Estonia is calling for a single model, according to another source. The text of the Ten reiterates that the location should follow the Commission's approach and that only taxing shares issued in the countries participating in the enhanced cooperation is currently being determined. In this sense, the statement explains, important elements to answer this question include the risks of relocations and administrative costs. According to another diplomat, the departure of the Estonians did not really come as a surprise to anybody working on the dossier.
For derivative products, the statement also says that the Commission's approach is the right one. This was not to the liking of the British Chancellor, George Osborne, who stressed that his country had always made it clear that states wishing to apply an FTT could do so, as long as this had no impact on any other country. On the question of location, he explained that the Commission's approach would have an impact on all states of the EU. “If the FTT impacts non-participating countries, then I am afraid we will have to go to the Court”, he warned.
As regards the scope of application of the tax on derivative products, the statement is almost as vague as the one issued in January of this year (see EUROPE 11240). It calls for a broad base and low rates. The only thing that has changed since January is that this application should not have an impact on the cost of sovereign borrowing, a point which has been on the table since September at least. The same source explained that the trouble lies in delimiting what needs to be exempted, in other words how to pin down what is actually to be exempted.
The participating states add that they will further analyse the question of the potential impact on the real economy and pension funds, in order to minimise this impact.
According to the first source, the states are wondering how to define a pension fund. It is also noted that many activities carried out by these funds are already exempted from the scope of application of the tax. France, incidentally, is not greatly in favour of this exemption, whilst Belgium, Germany and Spain are calling for it. The Netherlands, which will not be participating in the FTT, joined the debate. The Dutch Minister, Jeroen Dijsselbloem, said that the future FTT should not have an impact on Dutch pension funds.
In any case, the finance ministers have set themselves a very short deadline. They hope to settle all outstanding issues by the end of June 2016 and, at the same time, are calling on the experts, in close coordination with the Commission, to devise adequate rates for all different variations.
Among the other issues put to bed, as regards shares, the Ten state that so-called intra-day transactions should be taxed alongside all transactions of a chain, excluding the representatives and clearinghouses when they act as facilitators. No market-making activity exemption will be granted for derivatives.
The German finance minister, Wolfgang Schäuble, explained that although the first stage of the FTT was modest and imperfect, it would step up the pressure on the non-participating states to adopt the tax and was better than doing nothing at all. “I would like to ask all of you to join us, and in a short time we will be much more successful”, he said. (Original version in French by Elodie Lamer)