This week, the Economic and Financial Affairs Council (ECOFIN) negotiated the long discussed project of a European financial transaction tax. Once again, no agreement has been reached. However, the ten EU countries, which are prepared to engage in “closer cooperation” concerning the taxation of financial products, agreed on main issues regarding the taxable base. Nevertheless, in spite of the further delay, trade unions and civil society reacted with cautious optimism.

The Economic and Financial Affairs Council (ECOFIN) has been discussing the European financial transaction tax (FTT) project for over 5 years. The implementation of the tax is urgently required to fill the budgets holes, caused by bank rescue packages and the financial crisis. Apart from that, it is to make highly speculative transactions more expensive, thereby contributing to more stability in the financial sector. However, the finance lobby is resisting any agreement, because of which the negotiations are greatly slowed down.

However, the meeting this week was once again considered to make-or-break: the failure to reach an agreement would mean that the project itself has failed, commented the Austrian Finance Minister, who is heading the negotiations. Nevertheless, once again, no understanding was accomplished and the next deadline for reaching an agreement has been postponed to summer 2016. However, an agreement in principle has been reached that the FTT should work similar to a value added tax on the trade with regard to bank and stock market products. In particular, the States are still split over the rate: the range discussed is somewhere between 0.01 and 0.1 percent. In the meantime, the number of States who are prepared to implement the tax has shrunk to ten – the latest country to opt out this week has been Estonia (with the option of opting in again). Even without British participation, the British Finance Minister voiced opposition to the tax, as he is worried it might result in restricting the privileges of the financial centre London. He threatened to take legal action should an agreement be reached.

Reactions by trade unions and NGOs

The European Trade Union Confederation (ETUC) welcomes the approximation and announces to continue lending its support for the introduction of the FTT. The Tax against Poverty campaign, which comprises 99 NGOs, called the agreement an acceptable compromise. It was possible to absorb the Estonian opt out. With regard to how the tax should be structured, it was vital to avoid exceptions for certain financial products. Hence, it was positive that as things stand, derivatives are to be covered by the tax. Also with regard to the open question of taxing pension funds – on which, for example the participation of The Netherlands depends on – one had to prevent a further watering down. The exceptions for market makers, government bonds and currency transactions in the current version would be its greatest weakness.

Further information:

Outcome of the Council Meeting

Statement from Tax Against Poverty (German only)