EU officials drop financial taxes from draft G20 wish-list

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A draft European Commission wish-list for the November G20 summit in Seoul no longer puts financial taxes on the agenda, according to an internal note seen by EURACTIV, which will be discussed today (19 October) by the College of Commissioners.

An information paper prepared by the services of Commission President José Manuel Barroso lists nine points which Brussels wants to highlight at the G20 summit in November.

Economic and financial issues dominate the document but no mention is made of financial taxes.

Only two weeks ago, EU Tax Commissioner Algirdas Šemeta proposed to introduce a Financial Activities Tax (FAT), saying it could bring cash-strapped governments up to 25 billion euros in revenue from the banking sector in the wake of the global financial crisis.

"The Commission will present these ideas to the European Council at the end of October and to the G20 summit in November,"the EU executive said at the time.

But now the idea has disappeared from the Commission's internal document.

"We think it is unrealistic to obtain backing at G20 level on this issue,"admitted an EU source close to the dossier.

Šemeta’s proposal was criticised for lacking ambition by supporters of a global Financial Transaction Tax (FTT). FTT aficionados include European heavyweights such as Germany and France, but other countries around the G20 table already made clear they would reject such a measure at the last summit in Toronto.

The Financial Activities Tax was considered as an alternative capable of winning more support at global level than the FTT. Moreover, Europe could apply it unilaterally without losing its competitive edge in the financial sector, the Commission argued.

The apparent U-turn could be seen as a tactical move to gather more global support on financial taxes. But it can also be interpreted as a sign that the Commission does not want to meddle further on an issue which is considered controversial even within the EU.

"It is a typical topic that will be brought ahead by some member states at the European Council"preceding the G20 summit, according to an EU source, who says it is characteristic of Barroso’s approach of avoiding controversial topics.

The note, finalised on 18 October, will be discussed today at a meeting of the 27-strong College of Commissioners. It focuses on the global recovery, currency adjustments, financial reforms (especially the application of Basel III), the review of the functioning and composition of international financial institutions (notably the International Monetary Fund) and global financial safety nets.

It also seeks a renewed push to conclude the Doha negotiations on global trade and set up a concrete development agenda aimed at fighting corruption and achieving the Millennium Development Goals.

Energy and climate change

Barroso is also insisting upon pushing G20 members to adopt stringent measures "to rationalise and phase out inefficient fossil fuel subsidies in the medium-term"in the wake of the Commission’s commitment to doing so.

The wish-list drawn up by Barroso’s services also renews calls for reduced fossil-fuel price volatility and for market transparency to be improved.

The Commission will also insist upon discussing the security of off-shore oil and gas activities following the spill in the Gulf of Mexico and the publication of its proposals on the issue last week.

Brusselsis also interested in using the G20 summit to make progress in discussions on climate change in view of a key UN meeting in Cancún, Mexico, at the end of the year.

Positions

 

Background

At the beginning of October, the European Commission proposed to introduce a Financial Activities Tax (FAT) in the EU, saying it will present its plan at the next G20 summit in Seoul in view of attracting international support for it.

A FAT relates to the total sum of profits and remunerations of financial institutions. It therefore taxes corporations rather than the individual actors involved in a financial transaction.

In proposing a FAT, the Commission ruled out the idea of a tax on financial transactions (FTT), which is aimed at hitting all kinds of capital movement, including equity, bonds and derivatives.

On previous occasions, the Group of 20 most industrialised nations in the world (G20) has shown little interest in an FTT, but it did not rule out a FAT.

The G20 is composed of Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, the Republic of Korea, Turkey, the United Kingdom, the United States of America and the European Union represented by the president of the European Commission and the president of the European Council.

Timeline

  • 28-29 Oct. 2010: EU summit in Brussels.
  • 11-12 Nov. 2010: G20 summit in Seoul.

Further Reading

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