Malta will be reducing €27 million a year from its contribution to the EU budget if the controversial Financial Transaction Tax (FTT) were to be introduced across the 27 member states from 2014.
In another attempt to try to sway opponents of the tax, which include Malta, the Commission has released a study showing the positive impact such a levy would have on member states’ contribution to the EU budget.
However, the Commission’s study fails to bring out the FTT’s impact on countries – such as Malta – that are highly dependent on financial services in terms of job losses and relocation of companies.
Should member states charge a 0.1 per cent tax on all stock and bond transactions and 0.01 per cent on derivatives, the EU would rake in some €80 billion to its budget from 2014, according to the study.
Member states would see their Gross National Income contribution slashed by 50 per cent.
Malta currently contributes some €60 million a year towards the EU’s coffers. The Commission’s calculations show that through the FTT, Malta would retain additional funding, as one-third of the taxes processed would remain in the member states’ coffers and would slash its GNI contribution by some €27 million a year.
Currently, Malta is a net beneficiary of EU funds and is estimated to receive almost twice as much in EU funds per year as it contributes – something which is set to change in future as Malta closes its GDP gap with the EU.
The EU finances its activities through three main sources. The biggest chunk is derived directly from member states’ coffers with a contribution based on the country’s GNI, while a portion of VAT and Customs proceeds are also passed onto the EU.
In its proposal, submitted last year, the Commission suggested the introduction of the FTT as part of an EU budget reform, particularly on how the 27-nation bloc should be financed.
However, although all member states agreed the sector was under-taxed (and exempt from VAT), there were strong divergences on whether an FTT imposed only on companies operating in Europe was a good idea.
Malta – which has seen its financial services sector flourish in the past years – is among the main opponents, together with the UK, Sweden and Luxembourg.
It argues that it will only be able to support this proposal if the FTT is first introduced on a global level so that all financial services operators are placed on a level playing field.
On the other hand, knowing that a global FTT is not possible, since the US, Japan and other key jurisdictions oppose it, Germany and France are pushing to have this tax in place as soon as possible. They see it as a possible way of gaining a bigger contribution from the financial sector, which was one of the main culprits of the recent financial meltdown.
Both the European Commission and the European Parliament are in favour of the tax.
According to a previous study, the introduction of this tax might result in the relocation of big banks and financial operators to jurisdictions outside the EU with the consequent loss of jobs, growth and income of tax on profits. It is estimated that in 2010, financial services in Malta contributed to 15 per cent of its GDP.