“So many are sold on the idea of a transaction tax, we should try and find a middle ground. And that middle ground could be to exempt pension funds,” Sharon Bowles, a British Liberal Democrat MEP told EurActiv, after her committee held a meeting with the German and French finance ministers in the European Parliament.
All 27 ministers were in town yesterday holding talks on how to stem the euro zone debt crisis. With Greece and Italy both in a crisis of leadership and debt, the highly contested FTT was a minor item on their agenda.
The European Union came forward with a proposal for the tax in September in spite of persistent opposition from powerful economies like the United States, India, Canada and the United Kingdom.
Pension funds have previously warned that an FTT on derivatives, an instrument widely used by the funds to insure against any losses, would depreciate the value of savers’ pensions.
“Small differences in return on long term savings make huge differences in final pension outcome,” APG, the Dutch pension fund wrote in a consultation paper to the European Commission.
APG calculates that the Dutch pension funds sector would have to pay €3 billion euro per year, which equals approximately 5.5% of the total taxes (57 billion euro) that the European Commission aims to collect.
Bowles is currently engaging banks in talks on how much of the tax would fall on their books and how much would fall on savers.
“I personally have some concerns on how much of the tax will be borne by the man in the street and the pension funds,” the politician said.
Asked whether she would be adding an amendment to shield pension funds from the tax, Bowles said: “This is something I have been thinking about.”
Her reservations were echoed yesterday by the British chancellor, George Osborne, who poured cold water over the tax.
“There is not a single banker in this world that is going to pay this tax. There are no banks that are going to pay this tax. The people who will pay this tax are pensioners,” Osborne, the head of the British Treasury, said in Brussels yesterday.
Commission will not back down
In spite of such resounding scepticism, the Commissioner for taxation, and the author of the proposal, Algirdas Šemeta said he will carry on making the tax into legislation due to overwhelming support from a public jaded by bank bailouts.
"We just need to look at the demonstrations – across the EU and across the world – to see how greatly citizens want the financial sector to make a proper contribution to the economy and to society as a whole", Commissioner Šemeta said during the finance ministers’ talks.
"Some may ask whether the commission feels the need to reconsider its proposal on the basis of last week's G20 Summit. The answer is categorically: No,” the Commissioner continued.
Under the proposal, the tax’s rates would be set by each member state, with a harmonised minimum rate of 0.1% on all transactions, except retail or central bank operations. Derivatives would face a smaller charge at 0.01% of the taxable amount.
If Šemeta manages to clinch unanimity on the proposal, it would apply as from 1 January 2014.