A financial transactions tax “similar to a stamp duty” and temporarily excluding derivatives is the last attempt made by the Danish EU presidency to enlist Britain's support for the controversial plan. Failing this, a vanguard group of 10 member states led by France and Germany have already indicated they will move forward on their own.
The Danish proposal will be on the table of EU Finance ministers during their meeting tomorrow (22 June) in Luxembourg, which is seen by many as the last chance to find an agreement among the 27 member states on the controversial tax.
Should this attempt fail, a group of at least ten member states led by Germany and France is likely to announce plans for a so-called "enhanced cooperation" mechanism to move forward on their own.
This would make the tax possible at European level for those countries who accept it and leave the others behind, as reported earlier by EURACTIV.
The compromise proposed by the Danish presidency envisages “a step-by-step approach starting with a narrow based transactions tax, similar to a stamp duty,” according to the paper seen by EURACTIV.
Under the plan, the tax would apply initially only to a limited set of financial products which would include “secondary market transactions with shares, bonds (but not government bonds) and possibly UCITS,” reads the Danish compromise text.
Derivatives would be subject to the tax only “at a later stage”, to alleviate concerns from countries like the UK where most of the EU's derivative trade takes place.
Under the original plan proposed by the European Commission, stock and bond trades would be taxed at the rate of 0.1%, and derivatives trades at 0.01%. A possibility to review these rates is also under consideration.
The Danish Presidency does not rule out either option but proposes a second track in case an agreement on the FTT proves impossible to reach. In the paper, it suggests “alternative ways of taxing and regulating the financial sector”.
If the ultimate objective is to extract more resources from the financial sector, other taxes than the FTT could be envisaged, the Danes argue.
Providing an overview of the debate within the EU Council of Ministers, the paper says that “some member states indicated their preference to focus further discussions on alternatives, such as a bank levy; a Financial Activities Tax [and] action through direct regulation of the financial sector”.
Some countries are opposed to the idea of considering alternatives to the FTT. And no proposal among those tabled by the Commission has received so far sufficient backing in the Council.
A European diplomat made clear that in case negotiations fail, an "enhanced cooperation" procedure will be the only way forward, with Germany expected to announce plans on Friday if no agreement is reached on the FTT.
Berlin needs the backing of at least other eight countries before submitting an official request for an enhanced cooperation to the European Commission, which will then assess the feasibility of the proposal.
Thus far, the European Union has launched only one enhanced cooperation for the establishment of a single EU patent. It involved 25 member states out of 27.
Ten countries have already indicated that they were ready to move forward: Austria, Belgium, Bulgaria, Finland, France, Germany, Greece, Italy, Portugal and Spain.