British Prime Minister David Cameron has ruled out the idea, and Irish Prime Minister Enda Kenny has echoed London’s concerns about the impact on the financial services industry.
The growing unlikelihood of an EU-wide tax is a blow to anti-poverty campaigners who have lobbied hard for the EU set a global example by introducing a financial transactions tax, or FTT, to help developing countries.
“The perspective of the detractors of the FTT is quite small-world,” said Laura Sullivan, European policy and campaign manager for ActionAid’s Brussels office. “These countries are focusing on one constituency, and in most cases that constituency is the financial sector.”
ActionAid, a South African charity, the InterAction alliance and Oxfam are among dozens of international organisations pressing global leaders to approve a tax and to use it to help developing nations.
Their campaign gained fresh momentum in March 2011 when the European Parliament backed an FTT and again in September when the European Commission proposed taxes on stock, bond and derivatives trading within the 27-nation bloc – although these efforts are aimed more generally at raising revenues in times of tight budgets. The Commission estimates the fees would generate €57 billion in annual revenue for cash-strapped governments.
Then in November, the UN’s Human Development Report urged world leaders to back an FTT, warning that gains in poverty-reduction are at risk without more investment in developing countries.
Development aid hit a record $141 billion in 2010 (€110.7 billion), but aid advocates and charities fear that foreign assistance budgets will be cut to address debt and economic problems in the EU, United States and Japan – the biggest donors. The EU accounted for half of international aid in 2010, according to statistics from the Organisation for Economic Cooperation and Development.
Preventing ‘a Vegas situation’
Sullivan says a financial transaction tax should not be used to plug current budget holes but as a source of funding for addressing sustainable development and climate change in needy nations.
“It is clear there is a need for additional climate change and development funding,” she said, urging EU leaders to press ahead with the Commission’s proposal to tame speculation on stocks and commodities to prevent “a Vegas situation of betting on food supplies”.
“We appeal to these leaders to think beyond their borders,” Sullivan said.
French President Nicolas Sarkozy, a leading advocate, has vowed to press ahead with the idea along with Germany and other countries willing to join. Jean Leonetti, France’s European Affairs minister, recently expressed confidence that a tax would be approved through on an intergovernmental basis.
Besides Britain and Ireland, officials in the Czech Republic, Malta and Sweden have also expressed reservations about the FTT. Italian Prime Minister Mario Monti has backed French calls for the tax, but also voiced concern about introducing a levy that did not include all 27 EU countries.
The chances of a global tax are even less likely. The Group of 20 leaders nixed the idea at their meeting in November, despite pressure from their host, Sarkozy.