Financial transaction tax
Nine eurozone states wish to speed up work on FTT
By Tanguy Verhoosel | Wednesday 08 February 2012
Nine EU states, all members of the eurozone (Germany, France, Italy, Spain, Belgium, Austria, Portugal, Finland and Greece), urged the Danish EU Council Presidency, on 7 February, to “accelerate” work on introducing a financial transaction tax (FTT) in the Union. Are they moving towards enhanced cooperation, given the objections of some of their partners? This is not the Commission’s approach - for now? – repeated Internal Market Commissioner Michel Barnier, on 8 February.
These nine states “support fully in principle the draft directive” presented by the Commission in September 2011, reads a statement by French Finance Minister Francois Baroin, who detailed the content of the letter sent to Copenhagen by Italian Prime Minister Mario Monti and the finance ministers of eight other countries. The EU executive has proposed to impose a tax of 0.1% on trading in shares and bonds, and 0.01% on derivatives transactions.
The letter’s signatories express “their strong conviction that a financial transaction tax is necessary at EU level both to ensure that the financial sector makes a fair contribution to the cost of the financial crisis and to improve financial market regulation”. Citizens share this conviction, add the ministers (who are “aware of the high expectations of European public opinion”), which justifies the Council’s work being speeded up “so as to complete a first reading of the draft directive during the first half of 2012”.
Although they stress the need to introduce a financial transaction tax “at European Union level,” it can be assumed that the nine countries will study the possibility of proceeding through enhanced cooperation – there are enough states to do so – in the event the matter has not moved forward by the end of June. Their letter is a “very strong signal that the heart of the eurozone is determined to advance,” reads Baroin’s statement.
“Nine is better than two or three. But it is not 27,” noted Barnier. Taxation Commissioner Algirdas Semeta “is still working on introduction of the tax by the 27 EU member states,” he continued. “It would be useful for all Union countries,” he added, describing the FTT as “economically tolerable, financially productive [it could generate €57 billion a year in revenues, estimates the Commission], technically fairly easy to implement and above all, politically fair”.
The Danish Presidency is proceeding cautiously. It of course “welcomed” the initiative by the nine states, a Franco-German initiative, but simply announced that it “is looking into how to respond to this request at technical level”.
Denmark is one of the many member states (the United Kingdom, Sweden, Ireland, the Netherlands, etc) reluctant if not categorically opposed to the idea of setting up such a tax at a level limited to the European Union alone. They fear the relocation of financial activities outside the Union and consequently a collapse of their GDP.
According to certain well-known economists, including Stephany Griffith-Jones of Columbia University (see
Europolitics 4359), such concerns are unfounded. They are even in favour of the launch of individual pilot projects.
This option is being considered by France, whose government examined, on 8 February, a bill for the introduction of a financial transaction tax – whose scope would nevertheless be limited
to trading in shares of companies whose head office is registered in France and with stock market capitalisation of more than €1 billion, credit default swaps (CDS) and high-frequency trading – on French territory, from 1 August. Paris is counting on revenues of €1.1 billion a year.
Are they moving towards enhanced cooperation, given the objections of some of their partners?