Malta risks becoming isolated in its stance against the proposed EU tax on financial transactions if the scenario of applying it only to the eurozone were to materialise in the face of opposition by other EU member states.
The island yesterday made formal its opposition to the tax at a meeting of EU Finance Ministers in Brussels but it is almost alone in the euro area to take this stand so far.
The European Commission wants to introduce the tax in 2014. However, while France and Germany are all in favour, there is stiff resistance from other EU member states. Alfred Camilleri, the Finance Ministry’s Permanent Secretary who attended the meeting instead of Minister Tonio Fenech, said Malta would be sticking to its position against the tax if it was to be introduced only at an EU level. It would only support it if a level playing field were created and the tax imposed globally.
“If this does not happen it will only serve to drive business away into non-taxed foreign markets,” Malta argued. It also believes that the cost of the tax would likely be passed on to consumers.
Yesterday’s Ecofin was the first occasion in which the 27 member states were asked to officially state their position on the Commission’s proposal, launched by President José Barroso last September. The discussion that followed showed member states are divided on the controversial issue.
France and Germany, the biggest two economies in the EU, are supported by Austria, Belgium, Finland, Greece, Ireland, Slovenia and Spain in backing the initiative. In the opposite camp are the UK, which is by far the largest financial market in the EU, Malta, Sweden, Bulgaria, Cyprus and the Czech Republic.
Seven other member states – Denmark, Italy, Latvia, Luxembourg, the Netherlands, Romania and Slovakia – said they hadn’t made up their mind, though several of them noted they had serious concerns. The remaining five countries did not express an opinion.
According to the EU treaty, the proposal will need the unanimous support of the 27 member states to be approved.
Council sources told The Times yesterday that, although it appeared the EU would not be able to agree on such a controversial proposal in the foreseeable future, German and France may push the idea of applying it only to the eurozone. German Chancellor Angela Merkel and France’s President Nicolas Sarkozy have already mentioned this possibility.
If this idea is taken forward, Malta would be almost isolated as the countries opposing the tax are mainly non-eurozone member states, with the exception of Cyprus, the sources said.
In order to make financial institutions, the main culprits of the current financial crisis, contribute towards the strengthening of the European economy, Brussels wants to introduce a tax rate of 0.1 per cent on the exchange of shares and bonds and 0.01 per cent on derivative contracts taking place in the EU.
The proposal states the tax will be imposed on almost 85 per cent of transactions that take place between financial institutions while citizens and businesses would not be directly taxed. House mortgages, bank loans, insurance contracts and other normal financial activities carried out by individuals or small businesses fall outside the scope of the proposal.