At least nine countries led by Germany are expected to ask the European Commission to draw up plans for a so-called "enhanced co-operation" on the financial transactions tax (FTT) following a meeting of EU finance minister in Luxembourg on Friday (22 June).
Finance ministers took the decision after their Austrian colleague Maria Fekter told them that Vienna's support for the EU's permanent bailout fund – the European Stability Mechanism (ESM) – depended on progress on the FTT.
“If I do not get this [enhanced] co-operation, then the ESM will not be ratified and this would really be a pity,” Fekter told the ministers.
At least nine member states must indicate that they want to proceed with an enhanced co-operation and a qualified majority of all 27 member states have to agree to the procedure, which has been used only twice before – on cross-border divorce rules and on a common patent scheme.
If the procedure goes through, these countries will go their separate ways and implement the tax without the other EU countries on board.
Bulgarians make it nine member states
Ministers broadly fell into three camps at the meeting: in favour of the enhanced co-operation; against the FTT but not opposed to the enhanced co-operation being introduced by other countries; and in favour of the FTT, but wanting more time to decide whether enhanced co-operation is the best way forward.
EURACTIV understands that Germany is likely to lead in making the official request to the Commission for the procedure – the first stage in the process – acting on behalf of Austria, Belgium, France, Poland, Portugal and Spain.
The Bulgarians are also thought to back the enhanced co-operation, bringing the number to eight. The countries favourable to the FTT but wary of an enhanced co-operation – such as Finland, Italy, the Netherlands and Slovenia – could change their minds and join the process.
Ministers speaking in favour of the special decision-making procedure did so for a range of different reasons, with Polish Finance Minister Jan Vincent-Rostowski saying that Poland had outstanding “intellectual problems” with an FTT, and would prefer a financial activities tax.
Poland would nevertheless be willing to support the enhanced co-operation in order to reinforce a feeling of greater integration, and “to build a feeling of community."
"We think it’s an important symbolic move,” Vincent-Rostowski said.
Co-operation must not disturb single market
Member states most opposed to an FTT – including Ireland, Sweden and the UK – indicated they would not try to stop others from going ahead, but they cautioned that the enhanced co-operation procedure must be legal and clear.
Irish Finance Minister Michael Noonan told the meeting that, since an enhanced co-operation had never been introduced in relation to a financial portfolio, the move required careful legal examination to ensure it does not adversely effect the working of the single market.
His UK counterpart George Osborne warned that the type of transactions covered by the tax and how its proceeds could be spent must be clarified quickly if the project is to succeed without unsettling the already jittery financial markets.
“The are some fundamental questions that have not been dealt with [on the FTT], including how the proceeds of such a tax would be used… I would like the Commission to say that enhanced co-operation would not undermine the internal market,” said Luc Frieden, the finance minister of Luxembourg.
Algirdas Šemeta, the European commissioner for taxation, told the finance ministers meeting in Luxembourg that an FTT for all 27 member states was his preferred option but that “enhanced co-operation is better than no result at all”.
“We're delighted that a coalition of willing countries has finally asked the UK and other blockers to step out of the way. Europe can finally move beyond talking, and has a real opportunity to introduce an FTT that will help to fight poverty and climate change,” said Oxfam’s EU spokesman Nicolas Mombrial.
“To gain popular support, a significant part of the revenues should go to people who have been hit hardest by the economic crisis in poor countries, as suggested by Presidents Hollande and Barroso this week. Using the proceeds of a new tax only for EU projects or to pay down deficits would be a betrayal of the millions who support a Robin Hood Tax,” Mombrial said.
A financial transactions tax (FTT) is one of many proposals made to tax the financial sector and hinder market speculation. Many countries have already implemented a levy on banks’ assets and liabilities.
The European Commission and the International Monetary Fund have also examined the possibility of a financial activities tax which would place levies on profits and bonuses.
In a bid to lower national contributions to the EU budget, the European Commission proposed to tap into an FTT. The UK is the staunchest opponent of the tax, arguing that the move will encourage financial operators to route their business through tax havens.
In May the European Parliament supported the Commission proposal.
- End July 2012: Formal letter of application for an enhanced co-operation on the FTT is expected to be sent.
- European Commission: Financial Transactions Tax – FAQs & Docs
- European Parliament: Press release on opinion on FTT (23 May 2012)
- EURACTIV Czech Republic: Francie a N?mecko prý cht?jí zavést da? z finan?ních transakcí i bez Británie