The European Commission announced, on 22 March, that a financial transaction tax (FTT), if adopted as a new own resource of the EU budget, could reduce member state GNI-based contributions by 50%. That would not, per say, mean a reduction by half of total national contributions, as Commission President José Manuel Barroso said, seeing as the VAT-based own resource - considered by most as a member state contribution - is excluded from the calculation. In 2020, gross national income (GNI) contributions would go down by €54 billion, according to EU executive estimates.

“Some preliminary estimates suggest the reduction of this national contribution to the budget could be half – 50% of what could be without these own resources,” said Barroso. What he meant in fact was that GNI-based, not national, contributions would be slashed by half.

The breakdown of the €54 billion reduction of GNI contribution to the EU budget by member state would see Germany as the biggest real-terms winner with -€10.7 billion, followed by France (-€8.8 billion), the United Kingdom (-€7.7 billion) and Italy (-€6.5 billion). “We cannot eliminate GNI [contributions],” admitted Financial Programming and Budget Commissioner Janusz Lewandowski, as the volatility of customs and financial transactions cannot be predicted and entirely avoided.

EXTRA “REWARD”

According to the Commission’s proposal, around two-thirds of the revenue from the FTT would be fed into the EU budget and the remaining third would go directly into member states’ coffers. The budget commissioner explains that this latter part of the proposal is an extra “reward” for the countries with the largest amount of financial transactions and thus collecting the most money.

Lewandowski argues that the financial transaction tax is “one of the least harmful taxes to the real economy”. He says the FTT would enable switching taxation from labour to capital. “The financial sector is the only sector in the EU not to pay VAT despite making huge profits and receiving massive support by taxpayers’ money,” said the commissioner. The tax advantage of not paying VAT is estimated at €18 billion a year. On top of that, the financial sector is credited as having received €4.6 trillion in public aid since the start of the crisis. “Taxing the volatile transactions of all financial institutions at rates as low as 0.01% is only fair,” argued Lewandowski.

So far, nine eurozone member states have asked for work on the introduction of a FTT to be accelerated but chances of that happening across the bloc are slim in view of the reticence of countries such as Sweden and the United Kingdom. Asked what would happen with regard to reduction of GNI contributions if a financial transaction tax were to be agreed in the eurozone only and not at EU level, Lewandowski refused to answer. “I am not ready to discuss an FTT on the basis of enhanced cooperation.”