Europe stalls on financial transaction tax
The introduction of a European financial transaction tax could be delayed by six months
PLANS for a European financial transaction tax have been delayed for up to six months after talks between a European Commission-sponsored working group stalled, against a background criticism from stakeholders.
The FTT was initially designed as a sweeping 0.01% levy on shares, bonds and derivatives across the whole EU, with the hope that it would prevent speculative trading and prompt the financial sector to pay back some of what it received from governments during the financial crisis.
A working group of 11 member states, including France and Germany, have been responsible for negotiating the tax following the collapse of EU-wide talks last year after strong disagreement from members such as the UK, Sweden, and Denmark, who feared the EU would lose competitiveness in the financial sector.
Richard Asquith, head of tax at the TMF Group said of the news: “This tax has been rushed in design and implementation, so a delay of at least six months would be no surprise. The countries involved will have to listen more closely to the markets and other countries if they are to get this right”.
In a previous statement, Asquith had criticised the tax for being too ambitious, stating that: “the best plan is to start simply”.
A proposal from the commission in February set an initial date of 1 January 2014 for the FTT to come into effect in the 11 states making up the working group. However, fundamental disagreements among the working group over the FTT led to it becoming unfeasible, and with those disagreements persisting, the FTT is unlikely to see the light of day at all this calendar year. Governments are concerned over the impact the tax will have on the European economy, which is currently in a precarious position.
Domestic concerns have also affected the negotiations. Fears over increased costs of borrowing have led Spain and Italy to seek for bonds to be excluded from the tax. Meanwhile, the Netherlands is pushing for protection on pension funds, amid concern that the tax will damage personal savings. It is feared that some of the countries in the group are no longer even in favour of the FTT, and are seeking a diplomatic avenue of escape.
An update on the commission’s website stated that the tax: “could still enter into force towards the middle of 2014,” as long as “agreement is found before the end of 2013, and there is a speedy transposition into national law by the participating member states”. A spokeswoman for the commission said work on the tax was proceeding at “a good pace.”