Opposition to the European Commission’s proposal for the introduction of an EU Financial Transaction Tax increased yesterday with a number of eurozone member states speaking openly against the idea.
The UK, Sweden, Denmark and the Czech Republic are also against
Although informally many EU member states, including the majority of eurozone members, are against the idea of introducing this tax on an EU-wide basis only, so far very few have officially spoken out officially against it.
However, during a discussion on the priorities of the Danish presidency in a meeting of EU finance ministers in Brussels, Ireland made it clear that it has many doubts on this proposal and indicated it would be difficult for the Irish to support it.
Until now, Malta had been the only eurozone member state to make it clear that it opposes the introduction of the FTT unless it is introduced on a global level. The reasoning behind Malta’s position is that an EU-wide only tax will open the opportunity for financial services firms and operators to transfer their activities to jurisdictions outside the EU where this tax is not imposed.
The UK, Sweden, Denmark and the Czech Republic are also against the proposal and their position is similar to Malta’s. However, the inclusion of Ireland with the group of opposing member states strengthens Malta’s position as Dublin is also a member of the eurozone.
The FTT is being strongly supported by France and Germany – the largest two economies in the eurozone. They said that if there is no unanimity among the 27 they are even prepared to introduce the tax on a eurozone-only basis.
However, sources close to the Commission yesterday told The Times that it is becoming crystal-clear that “the proposal in the current form is not going to go far.”
“It is only France that is really pushing for this tax and Germany is just supporting it. However, there are too many countries which don’t agree,” Commission sources said.
In order to try to exert more pressure, the Commission is now expected to publish a new assessment of the impact of the introduction of a Financial Transaction Tax in the Union.
According to sources, the study’s aim is to appease the UK and pave the way for an agreement between the 27.
The Commission’s spokesman for taxation confirmed that the Commission is drafting another impact study on the FTT, as according to Brussels, the figures it presented in September with its proposal were “misused”, particularly in London and Stockholm.
Opponents to the FTT said last year’s Commission study showed, among other things, that the establishment of such a tax could reduce the long-term growth of the Union’s GDP by 0.53 per cent, and lead to job losses of 0.03 per cent to 0.2 per cent of the total mass of workers.
Sources said the Commission will try to demonstrate to its detractors that the tax will have “a very moderate impact on growth and employment” in Europe due to all the precautions being taken.
The Commission proposed to set very low minimum rates (0.1 per cent on transactions on shares and bonds; 0.01 per cent on derivatives) and to establish the residence principle as the rule where any financial transaction by a trader or financial institution established in the EU would be taxed, wherever it takes place.