As the 11 countries considering the Financial Transaction Tax prepare to finalise the details its details at the next Ecofin Council, many aspects of the tax are still hazy. EURACTIV France reports.
NGOs have raised concern over how the governments concerned are approaching the task. The next stage, on 6 October, will be to define the base of the tax, before deciding, most likely in June 2016, on the rates that will apply.
“This approach makes no sense; they should agree on a financial objective and then work out how to get there,” said Alexandre Naulot, from Oxfam.
Under the Commission’s current plan, the tax will levy 0.1% on share transactions and 0.001% on bond transactions, when one of the parties is based in one of the 11 countries of the Financial Transaction Tax (FTT) zone.
Clarifying the jurisdiction
The banking lobby, a firm opponent of the FTT, is demanding clarification on the geographical reach of the tax. Will branches of European banks in New York or Singapore have to pay the tax? This question should be answered in October.
A study by the German Institute for Economic Research (DIW) estimated the revenue from the FTT at €36 billion across the 11 participating countries. The European Commission’s own figures support this finding, but the projected revenue drops to €24 billion if bond transactions (most of which concern transfers of national debt) are excluded. But any reduction to the tax’s jurisdiction would lower these predictions.
Once the driving force behind the project, France is now torn between rival objectives: to support innovative financing methods on the one hand, and not to upset the big banks, which are important employers, on the other.
Friederike Röder, the director of the NGO ONE France, said, “The money is there, but the political will is lacking to reach a European agreement.”
On 1 September, the European Commissioner for Taxation, Pierre Moscovici, said, “The negotiations are getting more intense; the political will for an agreement is strengthening.”
A tax to calm the financial markets
Recent volatility on the world’s financial markets will only add to this political will. A very small tax on financial transactions could discourage high frequency trading.
James Henry, a consultant for the Tax Justice Network, said the current approach “amplifies any hiccups on the market”, and a small tax could discourage the extremely high number of transactions that occur during panic periods.
In the United States, Bernie Sanders, the independent Senator for Vermont, has also called for the debate on the FTT to be reopened. Sanders maintains that the tax would allow the US to raise $50 billion per year, part of which he proposed to spend on funding higher education.
In Germany, the opposition SPD has increased the pressure on Merkel’s finance minister Wolfgang Schäuble to establish the tax. “The FTT should be launched as soon as possible. It is unacceptable that those who created the financial crisis should avoid their responsibility by fighting this solution,” German MP Thorsten Schäfer-Gümbel told Bild in August.
Contradictory Capital Markets Union
But within the European Commission, which has long supported the establishment of the FTT, the tide appears to be turning.
Jonhathan Hill, the British Commissioner for Financial Services, is due to present his plan for the Capital Markets Union (CMU) by the end of September.
The aim of the CMU is to unify the workings of the financial sector across all 28 EU countries. But as one European source told EURACTIV, “The FTT creates an important distinction between the financial markets of 11 countries within the EU; it is a counter movement to the CMU.”