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BackDuring a meeting in Brussels on 07 November, the European Finance Ministers will discuss the implementation of the Financial Transaction Tax. Even though the intention is to reach agreement by the end of this year, there are still significant differences concerning the design of the tax. Whilst Austria and Germany support a broadly conceived tax, in particular the French Finance Minister Michel Sapin has been trying to obtain a watered down draft. AK and ÖGB will oppose such dilution attempts.
The meeting of The Economic and Finance Committee (ECOFIN), which take place in Brussels on 07 November, will once again have the Financial Transaction Tax (FTT) on its agenda. Even though 11 states have agreed to implement a European FTT in their country, the issue of the shape it should take remains controversial. Whilst in particular Austria and Germany prefer a broadly conceived tax based on high revenue, France, Italy and Spain are aiming at a watered down version.
Opposition against France’s proposal
Against this background, AK and ÖGB, together with more than 1000 organisations from 11 European countries, have called on the Finance Ministers of France, Italy and Spain to give up their resistance against a comprehensive Financial Transaction Tax. According to the proposal of these Finance Ministers, derivatives shall be widely exempt. Hence, only credit default swaps would be included; however, most of these products have already been banned.
Apart from that, when it comes to the tax base France, Italy and Spain favour the “issuance principle” over the “residence principle”. Whilst in case of the residence principle all transactions are included, where one of the participants resides in one of the 11 FTT Member States, the issuance principle only taxes transactions based on financial products, which were issued in one of the participating states. Based on this approach, revenue is massively reduced resulting in the fact that in particular smaller countries almost come away empty-handed. Apart from, the issuance principle is only of very limited use for monitoring derivatives trading.
Compromise proposal results in less revenue
The “compromise proposal” between residence and issuance principle, which was presented by French Finance Minister Sapin this week, is nothing more than window dressing. For example, the residence principle is only taken into account with regard to the distribution of revenue, but not as an assessment basis. It is true, that this results in smaller countries receiving slightly more revenue, but the overall revenue base on this tax remains very low. Only a fraction of the 30 billion euros, forecast by the EU Commission, would be generated. However, this money could be sensibly used in the education sector or for financing a lower wage tax. The regulatory aspect of the FTT is completely undermined by this proposal as derivatives continue not to be taxed.
That is why AK and ÖGB, together with a large alliance made up of international trade unions, parties and civil society organisations continue to fight for a broadly conceived Financial Transaction Tax, which will be able to regulate high frequency trading at the same time.
Further information:
“European Civil Society Statement” in advance to ECOFIN on 07 November 2014
Guest comment by Michel Sapin on his FTT proposal published in Handelsblatt: “Nägel mit Köpfen” (German)
Opposition against France’s proposal
Against this background, AK and ÖGB, together with more than 1000 organisations from 11 European countries, have called on the Finance Ministers of France, Italy and Spain to give up their resistance against a comprehensive Financial Transaction Tax. According to the proposal of these Finance Ministers, derivatives shall be widely exempt. Hence, only credit default swaps would be included; however, most of these products have already been banned.
Apart from that, when it comes to the tax base France, Italy and Spain favour the “issuance principle” over the “residence principle”. Whilst in case of the residence principle all transactions are included, where one of the participants resides in one of the 11 FTT Member States, the issuance principle only taxes transactions based on financial products, which were issued in one of the participating states. Based on this approach, revenue is massively reduced resulting in the fact that in particular smaller countries almost come away empty-handed. Apart from, the issuance principle is only of very limited use for monitoring derivatives trading.
Compromise proposal results in less revenue
The “compromise proposal” between residence and issuance principle, which was presented by French Finance Minister Sapin this week, is nothing more than window dressing. For example, the residence principle is only taken into account with regard to the distribution of revenue, but not as an assessment basis. It is true, that this results in smaller countries receiving slightly more revenue, but the overall revenue base on this tax remains very low. Only a fraction of the 30 billion euros, forecast by the EU Commission, would be generated. However, this money could be sensibly used in the education sector or for financing a lower wage tax. The regulatory aspect of the FTT is completely undermined by this proposal as derivatives continue not to be taxed.
That is why AK and ÖGB, together with a large alliance made up of international trade unions, parties and civil society organisations continue to fight for a broadly conceived Financial Transaction Tax, which will be able to regulate high frequency trading at the same time.
Further information:
“European Civil Society Statement” in advance to ECOFIN on 07 November 2014
Guest comment by Michel Sapin on his FTT proposal published in Handelsblatt: “Nägel mit Köpfen” (German)