FTT ‘by the end of the year’

Financial Mirror (Cyprus) - - FRONT PAGE -

Plans for a Euro­pean Fi­nan­cial Trans­ac­tion Tax have not ad­vanced since 2012. Now the Com­mis­sion wants to have the project wrapped up by the end of the year, set­ting a prece­dent for an EU-wide cor­po­ra­tion tax, ac­cord­ing to EurAc­tiv France.

Af­ter reach­ing a low-point last June, the Euro­pean ne­go­ti­a­tions on the FTT ap­pear to have been given a new lease of life.

“The FTT is not dead,” said Alexan­dre Naulot from the NGO Ox­fam France. Orig­i­nally sched­uled to come into force in 2015, the FTT has been the sub­ject of re­peated set­backs due to dis­agree­ments be­tween the ten par­tic­i­pat­ing EU coun­tries (France, Ger­many, Bel­gium, Por­tu­gal, Aus­tria, Slove­nia, Greece, Spain, Italy, Slo­vakia).

At the last meet­ing of EU fi­nance min­is­ters, the project was post­poned yet again. Min­is­ters will now re­vive their dis­cus­sions on 11 Oc­to­ber, when they will try to agree on a com­mon tax base.

The Euro­pean Com­mis­sion on Satur­day (10 Septem­ber) reaf­firmed its com­mit­ment to com­plet­ing the ne­go­ti­a­tions “by the end of the year”.

Hans Schelling, the Aus­trian min­is­ter for fi­nance who is lead­ing the dis­cus­sions, said, “Euro­pean Com­mis­sioner Pierre Moscovici said he hopes to see the dis­cus­sions com­pleted this year. That means we need clear re­sults in Oc­to­ber.

“The Fi­nan­cial Trans­ac­tion Tax has the full sup­port of the Com­mis­sion, which is cru­sad­ing for an EU busi­ness tax and plans to pro­pose a di­rec­tive in early Novem­ber on the cre­ation of a Com­mon Con­sol­i­dated Cor­po­rate Tax Base (CCCTB).”

As it deals with tax­a­tion, this del­i­cate project re­quires the sup­port of all 28 EU mem­ber states. But fail­ing una­nim­ity, the model of en­hanced co­op­er­a­tion will be used to launch the project in sev­eral coun­tries.

Un­der the en­hanced co­op­er­a­tion prin­ci­ple, a group of at least nine mem­ber states can launch tax projects on a vol­un­tary ba­sis, cir­cum­vent­ing the need for full una­nim­ity.

“And be­hind the suc­cess of the en­hanced co­op­er­a­tion on the FTT, which is a first in Europe, is the ques­tion of the cre­ation of a com­mon con­sol­i­dated cor­po­rate tax base in Europe: we need to set a prece­dent in or­der to ad­vance,” said Naulot.

If the ten coun­tries fail to agree, the FTT could be­come an in­ter­gov­ern­men­tal project. “At least, this is what some coun­tries’ EU rep­re­sen­ta­tions are say­ing,” the Ox­fam spe­cial­ist added.

The Com­mis­sion claimed not to have heard “this ru­mour” and said “the work is on-go­ing at a tech­ni­cal level”.

This sum­mer, Brus­sels also es­ti­mated that the FTT could bring in ?22 bil­lion per year. Pres­i­den­tial elec­tions on the hori­zon As the stan­dard-bearer of the FTT project, the po­lit­i­cal cost to François Hol­lande if France were to aban­don it just months be­fore the pres­i­den­tial elec­tions would be se­vere.

“The po­lit­i­cal cost of the de­lay has al­ready been felt. But the po­lit­i­cal cost of drop­ping the project just be­fore the elec­tions would be much more se­ri­ous,” said Naulot.

Cur­rently, the main ob­sta­cle is Bel­gium, which is re­sist­ing a tax on de­riv­a­tives, but which is also afraid of be­ing held re­spon­si­ble for the fail­ure of a Euro­pean project with such broad sup­port among ci­ti­zens, par­tic­u­larly since the 2008 fi­nan­cial cri­sis.

“The Bel­gians do not want to be held re­spon­si­ble for the fail­ure of the ne­go­ti­a­tions,” Naulot said.

The United King­dom’s planned exit from the Euro­pean Union could also give the FTT project a se­cond wind. The UK is not a mem­ber of the en­hanced co­op­er­a­tion group and has al­ways been op­posed to the tax.

“Some said that by in­tro­duc­ing this tax we would lose fi­nan­cial busi­ness to Lon­don. This ar­gu­ment no longer stands up,” Hol­lande told the French daily Les Echos on 29 June, just days af­ter Bri­tain’s shock vote to leave the Euro­pean Union. In Septem­ber 2011, the Euro­pean Com­mis­sion pub­lished de­tailed pro­posal for a tax on fi­nan­cial trans­ac­tions. For four years, mem­ber states have been un­able to reach an agree­ment on how this new tax should be im­ple­mented. Un­der the pro­posal, the FTT would ap­ply to all fi­nan­cial trans­ac­tions, ex­cept the pri­mary mar­ket and bank loans. Trans­ac­tions on shares and bonds would be taxed at 0.1%, and de­riv­a­tive prod­ucts at 0.01%. The FTT would have to be paid if at least one of the par­ties is based in the EU.

As the mem­ber states have failed to come to a global con­sen­sus, 11 coun­tries have launched an ‘en­hanced co­op­er­a­tion’ mech­a­nism, which will al­low at least 9 mem­ber states to progress on is­sues of com­mon in­ter­est, with­out be­ing held up by the other coun­tries.

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