EU to test support for new transaction tax among member states

The European Commission is preparing for talks with EU finance ministers next week in a bid to sound out whether there is support among the 27 for a financial transaction tax. The idea has continued to gain ground since the start of the financial crisis, despite opposition in the G20 from the US, Australia and Canada. France and Germany are keen to keep the tax on the agenda next week, when ministers will look at a Commission dossier on the issue – which the EU executive says will be “neutral”.

A previous Commission paper, published last April, estimated a financial transaction tax could yield around €20 billion a year for the EU’s governments, while the Party of European Socialists says the tax take could be as high as €200 billion a year if derivatives are included.

However, Taxation Commissioner Algirdas Semeta has previously indicated he is more in favour of an IMF-style financial activities levy on banks’ profits and pay, which he has said would stem “short-termism” in the sector.

Most EU member states favour a similar levy – Sweden, the UK and Germany have all introduced fees to force banks to pay for the costs of future crises – but they are divided on whether the money raised should be ploughed back into state coffers or be ring-fenced as a kind of banking insurance fund.

Malta also agrees with the introduction of a tax on banking “if this is introduced on a level playing field” among all the member states and other financial jurisdictions. However, until now Malta has always opposed the introduction of other forms of taxes by the EU as it deems that this is the remit of national member states.

During a summit meeting last June, EU leaders agreed that any future bank tax should be part of a “credible resolution framework” but failed to specify the details.

A spokesperson for the European Commission said that Commissioner Semeta was “neither for nor against a proposed financial transaction tax” and wants to see “whether there could be a consensus on this issue in the Council”.

EU finance ministers will be meeting in Brussels next week following the summer recess. Malta will be represented by Finance Minister Tonio Fenech.