EU-10 agree on partial FTT, EPP wants global deal

Ten euro zone countries agreed on Tuesday on some aspects of a harmonised tax on financial transactions - and gave themselves until the middle of next year to reach agreement on remaining issues, including tax rates, the group said in a statement.

A financial-transaction tax (FTT) is intended to recover some of the public money used to support banks, to curb speculative trading and to unify the various levies already charged in several EU countries.

The EPP Group’s negotiator on the European FTT, Othmar Karas, welcomed the agreement. “This is reasonable and an overdue political signal. Unfortunately this is just the fourth best option: this is just the lowest common denominator, further steps must follow,” the Austrian MEP said after the agreement.

Talks on imposing one have been dragging on since 2011. In September of this year, ministers from Germany, France, Italy, Austria, Belgium, Estonia, Greece, Portugal, Slovakia, Slovenia and Spain said they had made progress and they expected a political agreement in December.

Estonia, which did not sign the agreement, had been worried that because most of the shares traded by its financial institutions are issued outside the participating group, it would hardly get any revenue. At the same time, its traders would have an incentive to move their business elsewhere.

The joint statement by the ten said all share transactions, including intraday trading, would be taxed.

The tax would be paid by traders in one of the countries participating in the scheme on shares issued in those countries.

“In order to sustain liquidity in illiquid market configurations, a narrow market-making exemption might be required,” said the statement. France had insisted on such an exemption.

The ministers said they would analyse whether it would be better to tax all shares, regardless of where they were issued.

The ministers also agreed that derivatives transactions should be taxed “on the principle of the widest possible base and low rates and it should not impact the cost of sovereign borrowing.”

They said option-type derivatives should be taxed on the option premium. For other types of derivatives, the taxable base could be a termadjusted or non-term-adjusted notional amount, depending on whether the instrument has a maturity date.

They also agreed to further analyse the impact of the tax on the real economy and pension schemes as well as the financial viability of the tax for each country.

“On the basis of these features, in order to prepare the next step, experts in close cooperation with the Commission should elaborate adequate tax rates for the different variants,” the statement said.

The proposal of the European Commission from 2013 envisaged a tax rate of 0.1% on share and bond trades and 0.01% on derivatives trades. The FTT would have to be paid if at least one of the parties is based in the EU.

The longterm Karas - must be transactions tax.

“The best would have been to include all global financial centres. The second option was an EU-wide FTT, the third option was of the Eurozone. I remain optimistic,” Karas goal - to get according

a global to MEP financial joint action stressed.

“The purpose of the FTT is not to be another cash cow, but to have a regulatory effect. Risky and untransparent business practices should be taxed more,” he said.

In 2012 and 2013 the European Parliament voted by an overwhelming majority in favour of the swift introduction of an EU-wide FTT.

In December 2013 Parliament gave its consent to only 11 member states going ahead with the tax (533 votes in favour, 91 against and 32 abstentions).