Nine countries push for financial transaction tax

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Nine EU countries have asked the Danish presidency to put the financial transaction tax (FTT) on the 27-country bloc's agenda without delay, the French government announced in a statement yesterday (7 February).

François Baroin, the French Economy, Finance and Industry minister, says "the heart of the eurozone" is determined to introduce the new tax (see background).

The statement, released by Paris, says Italian Prime Minister Mario Monti and the finance ministers of France, Germany, Austria, Belgium, Spain, Finland, Greece and Portugal signed the letter.

The nine countries call on the Danish presidency to speed up the work of the Council of the European Union, which represents the governments of the individual member countries, so that a draft of the FTT directive is discussed in the first half of the year.

The initiative remains open to other countries and is complementary to the community approach on the issue, Baroin states.

Election context

Two weeks ago, France outlined a blueprint of its own financial tax. President Nicolas Sarkozy is hoping the levy will be approved before the first round of the presidential election in April.

In a recent statement, Baroin conceded that the tax may not win the backing of Britain and Sweden. Stockholm saw trading migrate to London when it introduced a similar tax in the mid-1980s.

Last year, the European Commission proposed a scheme to tax stock, bond and derivatives trades from 2014, potentially raising €57 billion with much of it from Britain, the region's biggest trading centre.

Under the EU plan, which needs the backing of all 27 member states to become law, stock and bond trades would be taxed at the rate of 0.1%, and derivatives trades at 0.01%.

Wolf Klinz (ALDE, Germany) said the tax should apply EU-wide, as this would send a positive signal to the rest of the world. He also warned against "go-it-alone" strategies of certain EU member states.

Anni Podimata (S&D, Greece), who is preparing Parliament's opinion on the Commission proposal, defended the tax as a way to raise "considerable funds in the fairest possible way". 

She also said that it would have a second beneficial effect, by removing incentives to enter into financial transactions that generate no added value besides profit for the traders carrying them out.

Markus Ferber (EPP, Germany), nonetheless warned against seeing the tax as the "magic solution to everything".  He said that it needed to target high-frequency and intermediary players more closely, to ensure that the cost is not simply transferred down the line to pension funds, which invest the capital they raise in financial products.

A financial transactions tax (FTT) is one of many proposals made to tax banks 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 Commission proposed to tap into an FTT. The UK is the staunchest opponent of the tax, arguing that the move will encourage bankers to route their business through tax havens.

The EU's draft tax has been designed to cover the widest possible scope of financial transactions involving stocks, bonds, derivatives, and over-the-counter derivatives that currently skirt stock exchanges.

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