The Financial Transaction Tax (FTT) has a strong political support across Europe - so far nine European leaders of countries representing over 90% of Eurozone GDP have called on the Danish Presidency to fast-track an agreement on the FTT. It is estimated that a tax supported by this coalition of the willing would raise almost €40 billion a year.
Last June 22 the EU Finance ministers rejected the Commission proposal for an EU-wide FTT, opening the way for at least nine countries to press ahead with the levy. "We can note that the financial transactions tax as proposed by the European Commission has no unanimous support by member states," Danish economy minister Margrethe Vestager said after chairing a public debate with finance ministers from all EU countries.
This is the first time enhanced cooperation (procedure where a minimum of nine EU member states are allowed to establish advanced integration or cooperation) would be used on a major economic dossier "setting a precedent over taxation, a sovereign matter." At least nine countries may submit an official request for an enhanced cooperation to the European Commission, which will then assess the feasibility of the proposal. Ten countries have already indicated that they were ready to move forward: Austria, Belgium, Bulgaria, Finland, France, Germany, Greece, Italy, Portugal and Spain.
The compromise proposed by the Danish presidency envisages “a step-by-step approach starting with a narrow based transactions tax, similar to a stamp duty.” It means that the tax would apply initially only to a limited set of financial products: secondary market transactions with shares, bonds (but not government bonds) and possibly Undertakings for Collective Investment in Transferable Securities (UCITS).”
This could appeal to certain countries, such as the UK, where most of the EU’s derivative trade takes place. The original European Commission proposal included stock, bond trades and derivatives trades at 0.01%. A possibility to review these rates is also under consideration.
The compromise will also allow “alternative ways of taxing and regulating the financial sector.” Some member states indicated their preference to focus further discussions on alternatives, such as a Financial Activities Tax - an action through direct regulation of the financial sector.”
The European Commission’s most up-to-date assessment of the impact of an FTT shows that it could have a positive effect on growth. Implementing the tax would lower growth by an average of just 0.004 per cent per year in the coming decades (-0.28% by 2050) but if a significant portion of the revenue was invested in “growth enhancing public investment”, the overall effect would be positive.
Following the adoption of the Parliament Opinion, Ricardo Cortés Lastra, MEP from the Group of the Progressive Alliance of Socialists and Democrats (S&D), said: “Part of the funds from an FTT should be spent to eradicate poverty around the world."
Algirdas Šemeta, European Commissioner for Taxation, said: “From a small tax we can generate substantial revenues to finance growth-enhancing measures, support growth-friendly tax reforms or help fund global challenges such as development and climate change.”
“Civil society response”
66% of Europeans are in favour of the principle of a Financial Transaction Tax, according to Eurobarometer.
Nicolas Mombrial, Oxfam’s EU policy advisor, said: “EU leaders meeting today cannot afford to ignore this overwhelming vote in favour of an EU-wide tax on financial transactions. Latest polls show two-thirds of Europeans support an FTT, which helps explain why MEPs from all political parties and from countries opposing the tax, such as the UK and the Netherlands, voted in favour."
"The European Union needs a Financial Transaction Tax as part of a reformed Tax Policy. This new Tax Policy must be the basis for a renewed European Budget", said Jo Leinen, President of the European Movement International (EMI).
In May, EPHA along with 200 other Civil Society Organisations wrote to Finance Ministers encouraging them to endorse the FTT as the IMF and independent studies found the FTT to be a credible, effective and growth-friendly tax that makes sound economic sense. Transaction taxes have already been introduced in more than 40 countries – not only 10 European Member States, such as the UK and France, but also the world’s fastest growing economies like Brazil, India and South Africa.
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