Plans for a European Financial Transaction Tax have not advanced since 2012. Now the Commission wants to have the project wrapped up by the end of the year, setting a precedent for an EU-wide corporation tax. EurActiv France reports.
After reaching a low-point last June, the European negotiations on the Financial Transaction Tax (FTT) appear to have been given a new lease of life.
“The FTT is not dead,” said Alexandre Naulot from the NGO Oxfam France. Originally scheduled to come into force in 2015, the FTT has been the subject of repeated set-backs due to disagreements between the ten participating EU countries (France, Germany, Belgium, Portugal, Austria, Slovenia, Greece, Spain, Italy, Slovakia).
At the last meeting of EU finance ministers, the project was postponed yet again. Ministers will now revive their discussions on 11 October, when they will try to agree on a common tax base.
French MPs have voted to apply the Financial Transaction Tax to day trading, but the Ministry of Finance fears this will cause further delays to European negotiations. EurActiv France reports.
The European Commission on Saturday (10 September) reaffirmed its commitment to completing the negotiations “by the end of the year”.
Hans Schelling, the Austrian minister for finance who is leading the discussions, said, “European Commissioner Pierre Moscovici said he hopes to see the discussions completed this year. That means we need clear results in October.
“The Financial Transaction Tax has the full support of the Commission, which is crusading for an EU business tax and plans to propose a directive in early November on the creation of a Common Consolidated Corporate Tax Base (CCCTB).”
The complex domain of taxation
As it deals with taxation, this delicate project requires the support of all 28 EU member states. But failing unanimity, the model of enhanced cooperation will be used to launch the project in several countries.
Under the enhanced cooperation principle, a group of at least nine member states can launch tax projects on a voluntary basis, circumventing the need for full unanimity.
French Finance Minister Michel Sapin has urged his European counterparts to make derivatives play a very small part in the tax base for the Financial Transaction Tax. Sapin hopes this will unblock negotiations on the project, which has been at an impasse for 2 years. EurActiv.fr reports.
“And behind the success of the enhanced cooperation on the FTT, which is a first in Europe, is the question of the creation of a common consolidated corporate tax base in Europe: we need to set a precedent in order to advance,” said Naulot.
If the ten countries fail to agree, the FTT could become an intergovernmental project. “At least, this is what some countries’ EU representations are saying,” the Oxfam specialist added.
The Commission claimed not to have heard “this rumour” and said “the work is on-going at a technical level”.
This summer, Brussels also estimated that the FTT could bring in €22 billion per year.
Presidential elections on the horizon
As the standard-bearer of the FTT project, the political cost to François Hollande if France were to abandon it just months before the presidential elections would be severe.
“The political cost of the delay has already been felt. But the political cost of dropping the project just before the elections would be much more serious,” said Naulot.
Currently, the main obstacle is Belgium, which is resisting a tax on derivatives, but which is also afraid of being held responsible for the failure of a European project with such broad support among citizens, particularly since the 2008 financial crisis.
“The Belgians do not want to be held responsible for the failure of the negotiations,” Naulot said.
The Brexit effect
The United Kingdom’s planned exit from the European Union could also give the FTT project a second wind. The UK is not a member of the enhanced cooperation group and has always been opposed to the tax.
“Some said that by introducing this tax we would lose financial business to London. This argument no longer stands up,” Hollande told the French daily Les Echos on 29 June, just days after Britain’s shock vote to leave the European Union.
In September 2011, the European Commission published a detailed proposal for a tax on financial transactions.
For four years, member states have been unable to reach an agreement on how this new tax should be implemented. Under the proposal, the FTT would apply to all financial transactions, except the primary market and bank loans. Transactions on shares and bonds would be taxed at 0.1%, and derivative products at 0.01%. The FTT would have to be paid if at least one of the parties is based in the EU.
As the member states have failed to come to a global consensus, 11 countries have launched an ‘enhanced cooperation’ mechanism, which will allow at least 9 member states to progress on issues of common interest, without being held up by the other countries.
The 11 countries working on the Financial Transaction Tax project are: France, Germany, Austria, Belgium, Spain, Estonia, Greece, Italy, Portugal, Slovakia and Slovenia. Estonia finally withdrew from the project.
- 11 October: meeting of EU finance ministers in Brussels