European Union ambassadors are being urged to inject momentum into stalled plans for a tax on financial transactions as a December deadline looms, an EU document seen by Reuters shows.
A group of 11 of the bloc’s 28 member states, including Germany, Italy and France, have agreed in principle to a financial transaction tax (FTT) designed to make banks pay for the taxpayer aid they received in the 2007-09 financial crisis (see background).
Britain and the remaining EU states have refused to take part in the process, saying that such a levy would damage financial markets.
Moving from principle to blueprint by the 31 December deadline set by the plan’s 11 member group of supporters is proving difficult for the bloc’s presidency Italy, which is now seeking political intervention to get things moving.
“While measurable progress has been made towards convergence of views of the member states on the scope of the FTT, the scope of derivatives as well as the taxation principle remain a key open issue which block the presidency from presenting a compromise text that would lead to an agreement,” a document prepared for Thursday’s meeting of EU member ambassadors said.
The ambassadors are being asked to resolve key disagreements and ask their staff to find a compromise by the end of the year, it added.
A failure to reach some sort of deal before the deadline would be a major political embarrassment for France and Germany, which had been leading campaigners for the FTT initiative.
Ambassadors usually leave it junior diplomats to sort out technical issues. A series of trade-offs may be needed to secure even a broad deal on time.
Because some of the 11 states prefer not to tax transactions of shares in non-listed companies – typically held by founding families – Italy is proposing that this element of the scheme could be optional for each country, the document said.
There is general agreement that the tax would apply to shares of listed companies, but there is no common ground on what types of derivatives should come under the net initially.
The EU presidency has asked the European Central Bank to show how taxing certain derivatives could affect monetary policy and financial markets, the document showed.
Meanwhile, some countries want to tax credit default swaps, while others want an exemption for equity derivatives.
Divisions remain over the criteria for levying the tax, with some backing a tax based on where the issuer is located, arguing that this would make it easier to collect.
The Financial Transactions Tax (FTT), also known as the Tobin tax, is set to be adopted by 11 EU states – Germany, France, Italy, Spain, Belgium, Austria, Portugal, Greece, Slovenia, Slovakia and Estonia.
The European Commission launched the proposal in September 2011 under the so-called ‘enhanced cooperation’ procedure, which allows a small vanguard of at least nine EU countries to move forward on matters of common interest.
Germany and France, the main proponents of the FTT, first pushed for an EU-wide implementation starting in 2014, but then agreed to resort to the enhanced cooperation mechanism in the face of fierce resistance from other EU countries, particularly Britain.
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.