Austria Tries to Break FTT Logjam With Plan to Tax More Trades
Austria said the European Union should tax more kinds of trades at a lower rate to move forward with a financial-transactions tax among 11 willing nations.
There is “clear movement” toward reaching a deal by year-end so the tax can start in 2016, Austrian Finance Minister Hans Joerg Schelling said. He downplayed concerns from Denmark and the Netherlands that the tax would penalize nations that don’t take part, saying they should instead join the tax effort as it gains momentum.
EU finance ministers sought to break longstanding logjams over which trades will be taxed and which countries will collect the revenue among countries that participate, in a meeting today in Brussels. Bigger nations like France favor a small-scale tax to start, while smaller countries want a broader measure that will raise more revenue.
German Finance Minister Wolfgang Schaeuble said any trading tax will be “very modest” to start and set the stage for future steps.
“What we are doing on the FTT issue is to try to draw lessons from the experience we made in the banking crisis,” Schaeuble said during a public debate in Brussels.
He linked the FTT project to the EU’s efforts on banking union and tougher markets regulation, saying change is needed to keep pace with the modern financial system.
‘Worst Idea’
EU policy makers have considered a transactions tax to raise money and discourage speculative trading, goals that have gained urgency since the financial crisis and the euro-area budget rules adopted in its wake. Efforts to build a common tax for all 28 member nations fell apart, followed by a scaled back proposal for a joint tax among 11 willing nations.
The plans have been criticized by banks and trading firms, which have warned that it could curtail investment at a time when the EU is seeking to boost anemic economic growth. Wim Mijs, chief executive of the European Banking Federation, called it “about the worst idea of the last three centuries.”
After talks among all EU nations collapsed, Germany, France, Spain, Italy, Belgium, Austria, Portugal, Greece, Estonia, Slovakia and Slovenia continued negotiations as part of a smaller potential FTT alliance. All except Slovenia signed the May 6 declaration calling for agreement on a “progressive” tax on equities and “some derivatives” by the end of 2014.
Ahead of today’s meeting, France had backed a plan that would shift revenue from countries where transactions take place to nations where the trading firms are based. This would allow the tax to be collected in the country of issuance, then allocated to take account of other parameters like residence.
No one spoke out in favor of the revenue shifting. Denmark’s Morten Oestergaard and Dutch Finance Minister Jeroen Dijsselbloem said any tax should only apply where trades are issued so as not to affect non-participating countries, while Austria — which supports a residence-based tax — focused on the scope of taxed trades.
“Our proposal was to make the assessment base as wide as possible, to include all products and when I say all products I mean that there can be exemptions which have already been defined in earlier discussions, such as sovereign bonds,” Schelling said. He called for more technical work before the 11 nations meet again to discuss the planned tax next month.
