Published on EurActiv (http://www.euractiv.com)
Ministers to mull alternative to Tobin tax
Published: 14 March 2012
EU finance ministers meeting in Brussels yesterday (13 March) asked the Danish presidency to consider compromise alternatives to the financial transaction tax (FTT) after a number of countries voiced concerns about the proposal.
Background
A financial transactions tax (FTT) - often called a Tobin tax for American Nobel laureate James Tobin who was amongst the first proponents - 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.
Nine countries – France, Germany, Italy, Spain, Belgium, Austria, Portugal, Finland and Greece – signed a letter to Denmark on 7 February calling for progress on the introduction of an FTT before the end of its EU Council presidency.
The UK and Sweden oppose an FTT, also referred to as a ‘Tobin tax’, but some other member states positions’ remained unclear until yesterday’s meeting.
The finance ministers of the Czech Republic, Luxembourg and Malta rejected the FTT proposal in its current form.
Netherlands ‘alarming’ research into Tobin tax
The Netherlands is one member state whose views were unclear until yesterday. Finance minister Jan Kees de Jager told the meeting that his country has still not finalised its position on the tax, that it is in favour of some form of tax on the banking sector, but that it remained unconvinced that the current FTT proposal would be efficient or effective.
He said Dutch research on the impact of such a tax had produced "alarming results", and he endorsed "looking at alternatives" instead.
With many countries remaining ambivalent, support for an enhanced co-operation procedure remained in doubt. Such a procedure cannot be opposed by member states if nine or more nations are in favour, and the proposal does not run counter to the Single Market.
However it must also be passed by qualified majority of the member states in the Council, with an outcome that now is unclear.
However finance ministers – including those from states strongly supportive of the FTT, such as France, Austria and Germany – also suggested that a compromise should also be sought.
New ideas to be discussed in Copenhagen
No compromise suggestions were considered yesterday, but proposals including some form of stamp tax – which already exists in the UK and was recently introduced in France – or a tax on trading frequencies, are amongst potential alternatives.
Margrethe Vestager, the Danish minister for economic affairs who chaired the meeting – who has herself voiced concerns about the FTT proposal in the past – told journalists afterwards that a two-faceted approach would now be adopted by finance ministers.
On the one hand the Commission will continue to address concerns with its FTT proposal, Vestager said, with the aim of finding agreement amongst member states. Simultaneously compromise alternatives will also be considered.
Such alternatives could be discussed by finance ministers as early as 30 and 31 March, Vestager said, when they meet again informally in Copenhagen.
The UK and Sweden oppose an FTT, also referred to as a ‘Tobin tax’, but some other member states positions’ remained unclear until yesterday’s meeting.
The finance ministers of the Czech Republic, Luxembourg and Malta rejected the FTT proposal in its current form.
Netherlands ‘alarming’ research into Tobin tax
The Netherlands is one member state whose views were unclear until yesterday. Finance minister Jan Kees de Jager told the meeting that his country has still not finalised its position on the tax, that it is in favour of some form of tax on the banking sector, but that it remained unconvinced that the current FTT proposal would be efficient or effective.
He said Dutch research on the impact of such a tax had produced "alarming results", and he endorsed "looking at alternatives" instead.
With many countries remaining ambivalent, support for an enhanced co-operation procedure remained in doubt. Such a procedure cannot be opposed by member states if nine or more nations are in favour, and the proposal does not run counter to the Single Market.
However it must also be passed by qualified majority of the member states in the Council, with an outcome that now is unclear.
However finance ministers – including those from states strongly supportive of the FTT, such as France, Austria and Germany – also suggested that a compromise should also be sought.
New ideas to be discussed in Copenhagen
No compromise suggestions were considered yesterday, but proposals including some form of stamp tax – which already exists in the UK and was recently introduced in France – or a tax on trading frequencies, are amongst potential alternatives.
Margrethe Vestager, the Danish minister for economic affairs who chaired the meeting – who has herself voiced concerns about the FTT proposal in the past – told journalists afterwards that a two-faceted approach would now be adopted by finance ministers.
On the one hand the Commission will continue to address concerns with its FTT proposal, Vestager said, with the aim of finding agreement amongst member states. Simultaneously compromise alternatives will also be considered.
Such alternatives could be discussed by finance ministers as early as 30 and 31 March, Vestager said, when they meet again informally in Copenhagen.
Next Steps
- 30h and 31 March: Informal meeting of EU finance ministers in Copenhagen
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