At the beginning of his speech, Algirdas Šemeta referred to the report of the Greek S&D MEP Anni Podimata and announced that he wanted to deal above all with the subjects addressed therein: apart from the taxation of the financial sector, this also concerns the taxation of CO² emissions and Eurobonds.

With regard to the taxation of the financial market, Šemeta repeated the following objectives of the Commission: first, to ensure that the financial sector is making a fair and substantial contribution to public finances; second, to complement financial sector regulation in correcting undesirable behaviour for society in this area, without undermining EU competitiveness; third, to avoid a patchwork of divergent national financial sector taxes which could create new obstacles to the Single Market.

Afterwards he repeated what the Commission had already presented in a Communication in autumn: according to its analyses, a Financial Activities Tax is a more promising option than the introduction of a Financial Transaction Tax, as such a tax would fulfil the criteria mentioned above and guarantee stability. This had been confirmed by the IMF and numerous scientific studies. Based on a maximum tax rate of 5 %, calculations indicate that the 27 Member States could generate an income of € 25 billion.

One would now wait for an impact assessment, which would scrutinise the cumulative impact of regulations, bank levy and taxation on financial institutions.

At a global level, the Commission would support further examinations to introduce a Financial Transaction Tax. The implementation of a Financial Transaction Tax only at EU level will also be an element of the impact assessment. Based on these analyses, the Commission will present a formal legislative proposal.

In the subsequent discussion, MEP Podimata fully supported the mentioned objectives. However, she would fail to see how a taxation of financial activities, hence of the profits, would contribute to the second objective - strengthening and complementing the supervision of the financial markets. Commissioner Šemeta replied that depending on the focus of this tax this objective could also be achieved, for example if the taxation would take the risk volume of an activity into account. Apart from that he emphasised that the consultations were not completed and that once the proposal of the Commission had been presented, there would be further discussions.

The Green MEP Sven Giegold noted that a contribution of € 25 billion generated by a Financial Activity Tax would not be enough compared to the external costs, which the financial sector would cause the rest of the economy.

The Liberal MEP Olli Schmidt asked Šemeta, which of the introduced innovative financial instruments he would prefer. In his opinion, the problem could not be solved through more taxation anyway.

Šemeta replied that the introduced instruments would concern completely different taxation based on different objectives. Concerning the taxation of the financial sector, the objective would be to close a tax loophole; the current analyses would indicate that a taxation of financial activities should be preferred over a Financial Transaction Tax. It was for example easier to prevent that the tax from being passed on to the end consumer.

The Social Democrat MEP Pervenche Berès pointed out that the Commission would obviously apply double standards concerning the application of impact assessments: “Each time we request a measure, it has to undergo a thorough impact assessment; however, in cases where a measure had a particular impact on the citizens, hence the review of the stability pact, no such impact assessment was carried out.” Apart from that, she noted, as did Podimata before her, that she did not see the benefit of such an assessment, if the Commission had already reached the conclusion that one of the two options would be unrealistic.

Other contributions concerned the issue, which aspects would be exempt from the Financial Activity Tax as well as exact plans and dates for the common consolidated corporation tax basis. There was not yet an answer concerning the first issue, said Šemeta; for the latter one a proposal would be submitted during the first quarter of the year.

In his speech, the Austrian economist Stephan Schulmeister pointed out that high frequency trading, which would dominate modern financial markets, had resulted in huge long-term price increases. This would result in the fact that investors were only looking for short-term gains, for example via the famous Credit Default Swaps, whereby they would fuel financial crises. This opportunity was just too profitable for Goldman Sachs for example, to not use this option as long as the rules of the game would allow this.

A Financial Transaction Tax would - due to the fact that it covers all these fast and speculative transactions - hit exactly those, whose activities have actually contributed to the development of the financial and the Euro crisis. The banks, which are still part of the real economy, giving loans for example, would not be covered. In contrast, a Financial Activity Tax would also cover these so-called boring banks, because one could not distinguish between banks which would “wildly speculate” and those which would serve the real economy.

Further information:

Article on the same topic issued by the campaign "Europeans for financial reform"