European Commission told to draft financial transaction tax by year-end

THE EUROPEAN COMMISSION has finally been instructed to draft a European Union (EU) directive authorising an EU financial transaction tax, which would apply to ten of the EU’s 28 member states.

Meeting on the margins of a Eurogroup session in Luxembourg on Monday (10 Oct), the governments of Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain agreed to push ahead with the project.

This follows debates since 2011, when the idea was first proposed by the European Commission, but blocked by the UK.

It was not the only country to oppose the idea, however, and as a result, its backers will use the EU’s ‘enhanced cooperation’ procedure to pass a law covering supporting states that does not apply elsewhere. A minimum of nine EU countries must back such a proposal for it to be taken forward.

Britain’s likely departure from the EU will be taken into account as the Commission drafts a text, which should be released by the end of this year.

Moscovici flags up ‘competitiveness’ of EU financial products versus UK

In his blog, Pierre Moscovici (pictured), the EU economic and financial affairs, taxation and customs commissioner welcomed the decision, but explained that ministers had backed imposing a tax on a “broad base, taxed at very low rates (still to be defined) to preserve the competitiveness of European financial products against those of the UK.” However, he added that a broad base would allow participating governments “to reap significant revenues”. This would include equities, bonds, derivatives, and more, said the commissioner, with EU diplomats saying this should also include share trading.

Moscovici said: “The main technical options have been resolved. The way is now free…to clinch a political agreement before the end of the year – the final step in this long journey.”

He claimed the decision was “a great success”, saying that EU officials has played a backroom, yet central role “to get this important dossier back on track.”

However, he accepted that there were still important decisions to thrash out regarding operational modalities: “We must find a way to control the cost of collecting this tax for states, for example. Agree on the tax rates themselves. Discuss the allocation of revenue, too…”

Looking ahead, Moscovici said that an agreement on a financial transaction tax would show that the EU could in future strike deals on taxation, which require unanimity among participating member states. It was, he said, “a signal that on such sensitive topics as taxation, often paralysed by the unanimity rule, it is nevertheless possible to move forward.”