Development aid organisations hailed an agreement, approved by 11 EU countries today (22 January), to set up a financial transactions tax (FTT), and called on the European Commission to follow France's example by allocating 10% of the revenue “to the benefit of the poorest in the world".
EU finance ministers gave the green light for the 11 countries to move forward with a harmonised FTT, opening a tricky debate on how the money should be used.
The countries are Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain. Under the ‘enhanced cooperation’ procedure, other EU countries can join at any time.
Algirdas Šemeta, the EU Commissioner responsible for taxation, hailed the agreement as “a major milestone in global tax history”.
The European Commission now has to submit a proposal on how to allocate the money, with overseas development assistance and heavily indebted eurozone countries in pole position to receive the extra money.
Šemeta said that "the considerable new revenues" the tax will generate "could be used for growth-friendly investment", and to support wider policy commitments such as aid to poor countries.
It is unclear however how the new revenue, estimated by a German institute at €37 billion per year if raised in the 11 countries, would be spent.
A contribution to EU budget?
France, which is one of the biggest promoters of the new tax, has indicated its openness to allocate up to 10% of this new income to overseas development.
Gaël Veyssière, spokesperson at the French representation to the EU in Brussels, told EurActiv that Paris was open to dedicating part of the tax revenue to the EU budget, "in a form yet to be defined".
French MEP Alain Lamassoure (European People's Party), who chairs the European Parliament's budget committee and has been a leader in promoting the FTT, developed the same idea, saying a common tax should finance common policies.
“The next stage is now to allocate revenue from the tax to finance the EU budget. It is an emergency to relieve national budgets burdened by the crisis, at a time when they continue through national contributions to fund almost all of the EU budget,” Lamassoure said.
In the European Parliament, the Green/EFA group, called on the Commission to table proposals without delay on how the FTT should work. Revenues from the FTT could play an important role as part of a system of own resources for the EU budget, notably for climate and development aid, said Danish MEP Emilie Turunen, the economic affairs spokesperson for the Greens.
ONE, a global advocacy organisation founded by Bono, the frontman of rock band U2, issued a statement welcoming the decision to set up FTT as “a great opportunity to find extra resources for development aid”.
“France is ahead of the game as a percentage of its existing national FTT revenues are already ring-fenced for development," said Eloise Todd, Brussels director of ONE. "Germany’s development minister Dirk Niebel has also spoken in favour of the idea – but his words now need to be turned into actions. All countries signing up to the EU FTT must ensure the poorest in the world benefit.”
The President of the Party of European Socialists (PES) Sergei Stanishev stated:
“Today marks a significant step in redressing some of the injustices of the financial crisis. Five years after the crisis first rocked global markets, we have a tax that directly targets the speculators whose greed had such catastrophic consequences”.
Stanishev added: “All Member States in the EU should take note of this positive step and remember that ordinary citizens still expect those who caused the crisis to become significant financial contributors to the solution”.
The PES President also said that the onus was now on the European Commission to immediately table an updated legislative proposal on the FTT's implementation.
The centre-right European People’s Party (EPP) Group also welcomed the Council's green light on the FTT. MEP Jean-Paul Gauzès (France), EPP spokesman in the Parliament's Economic Affairs Committee, stated:
"This is a crucial year for Europe's stability and growth. [...] For us it is of major importance that the financial sector contributes, as any other economic sector, to the collective effort to grow out of the crisis. This is the next step out of the crisis”.
Gauzès too called on the European Commission to swiftly put forward a new Directive proposal.
“I hope that the initiated enhanced cooperation agreed on by 11 member states will pave the way for a European and then global agreement on Financial Transaction Tax. The added value is indisputable - the FTT will fight against speculation, will introduce more justice into the fiscal system and should, in the long run, enable the strengthening of EU own resources” he said.
The American Chamber of Commerce to the European Union (AmCham EU) said it is disappointed in Tuesday’s decision to authorise 11 member states proceeding with the introduction of a financial transaction tax through enhanced cooperation.
"AmCham EU opposes such a tax because it will fail to accomplish a number of the perceived objectives and will negatively impact growth," the Chamber said in a statement.
In September 2011 the Commission published a detailed proposal for a levy on financial transactions.
Under the proposal, the FTT would apply to any transaction in financial instruments, excluding primary market issuance, and bank loans. Share and bond transactions would be taxed at 0.1% of the higher of consideration and market value and derivatives at 0.01% of their notional amount. The FTT would be due if at least one party to a transaction is based in the EU.
Germany and France, the main proponents of tax convergence, first pushed for EU-wide implementation starting in 2014, but then agreed to resort to the enhanced cooperation mechanism. On 9 October 2-12, 11 countries, two more than the required, expressed their intention to open an "enhanced cooperation" procedure under the EU treaty to launch the FTT [more].
- Council of the European Union: Financial transaction tax: Council agrees to enhanced cooperation (22 Jan. 2013)
- Irish Presidency: Decision on Financial Transaction Tax and debate on growth at first ECOFIN Council of Irish Presidency (22 Jan. 2013)
- Algirdas Šemeta: Speaking points on Financial Transaction tax (22 Jan. 2013)
- Press release: Commission proposes green light for enhanced cooperation on financial transactions tax (23 Oct. 2012)