Malta has not changed its position on the European Commission’s proposal to introduce a tax on financial transactions, Finance Minister Tonio Fenech told his colleagues in Brussels today.
During a political discussion at a meeting of EU Finance Ministers this morning, Minister Fenech said Malta believed this proposal harmed competitiveness and jobs if introduced.
“We are very sceptic and concerned on this proposal particularly on the negative impact it will have on competitiveness and jobs.
“Although it is true that we need to tackle the banking system and give a clear message that they must contribute more, my concern is that the banking system is the blood veins of the world economy and punishing your own blood veins may cause problems to your own body,” he said.
Mr Fenech said that the FTT is an inefficient tax and the cost to enforce it, particularly on small member states, would by far outweigh the benefits of the tax itself.
Positions of member states remained the same after the discussion with no real progress achieved.
The FTT was once again supported by the biggest economies, particularly Germany, France and Italy and opposed by the UK, Sweden and Malta.
The Commission is now expected to present a deeper analysis on the impact of the introduction of this tax on the European economy hoping to water down the position of the opposing member states.
Brussels is proposing that EU member states should start imposing a tax of 0.1 per cent on trading in shares and bonds, and 0.01 per cent on derivatives transactions.
Unanimous agreement is necessary for the introduction of this tax.
EU finance ministers are today studying proposals from a number of countries on how to impose a cross-border tax on the finance industry.
Four decades after the idea of the tax devised by economist James Tobin, the tax (FTT) is aimed at raising revenues from financial firms, particularly after the banks benefited heavily from taxpayer bailouts.
Tax questions require unanimity across the 27-state European Union, and with further opposition from Sweden, which cites a failed experiment of its own, and the Czech Republic, there is no chance of the tax being taken up across the board.
A special provision of the EU's Lisbon Treaty does allow for at least one third of the EU's member states to trail blaze new laws among a smaller group of nations, using so-called "enhanced cooperation."
No decisions on the tax are expected at the meeting in Brussels today.
German Finance Minister Wolfgang Schaeuble said on entering the talks that if there is no chance of bloc-wide agreement, "you have to think about alternatives and compromises."
He said: "If you always knew before what's not possible, the world would never have been created."
He also said that since Europe imposes a value-added tax on products and services, "we have to think about whether the exemption for financial products and financial services is justified."
He added: "I think it is rather not justified."
However, Sweden's Anders Borg maintained: "We believe a financial transaction tax is difficult to accept, it will increase the lending cost, the cost of capital for companies and the cost for governments.
"So it is a proposal that is not good for European growth."
President Nicolas Sarkozy announced in January that a financial transactions tax in France would take effect in August, saying it would add one billion euros annually to state revenues.
British Prime Minister David Cameron retorted that French banks would simply move to the City of London to escape the tax.
But experts say the tax would likely hit any financial institution that has any foothold in the nine countries -- thereby affecting the City as well.
With Chancellor of the Exchequer George Osborne en route for the United States, Britain sent its financial services minister Mark Hoban to the talks.
A diplomat said that in preparatory discussions among officials, "more questions have been raised than answers."
The nine said in a letter demanding that the EU examine their plans that the tax is necessary "to ensure a fair contribution from the financial sector to the costs of the financial crisis, but also to improve the regulation of markets."
The provision for "enhanced cooperation" has already been used to overcome difficulties in harmonising some aspects of cross-border divorce law, and is also currently the vehicle for a single EU patent.
But Denmark, currently in the EU chair, has stressed that this provision is applicable only as a "last resort."
Diplomats have recalled that the patents push is making progress only now after decades in legal limbo following challenges from Italy and Spain on that issue.