Financial transaction tax: 'Now effective'?

Published 01 October 2012

France and Germany still need the backing of a number of member states to put in place a European Union financial transaction tax (FTT), despite claims from French President François Hollande that the tax is "now effective". EurActiv.fr reports.

For over a year now, Paris and Berlin have been battling to persuade their European partners to put in place an FTT.

Yet whether and in what form the EU may impose such a tax in Europe is still unclear, despite claims to the contrary. Questions remain over its timeframe, the proposed tax base and whether this will be factored into the EU's 2014-2020 budget.

In Paris, the government presents the tax as a coup for the ruling socialist party. It makes up one of the pillars of the growth and jobs "reorientation of Europe" packet adopted in June.

"Not all countries will adopt the financial transaction tax, but it is nevertheless effective", Hollande said in presenting the transposition bill for the fiscal treaty on 19 September.

But Hollande's plan is not done yet, reports EurActiv.fr.

A working group, launched by Germany and France in March 2012, continues to discuss the proposal. Poland and Austria say they will take part in the project. To form a robust cooperation agreement, a minimum of nine countries need to agree.

What base?

At a hearing at the National Assembly on 26 September, the French European affairs minister, Bernard Cazeneuve, said that Belgium, Slovenia, Slovakia, Greece, Italy, Spain, Estonia and Finland could make the leap.

The day before, in Brussels, Cazeneuve made clear that the political weight of the countries involved would be as much as a factor as as the number.

What is more, many of these countries are still hesitant, citing the wide-ranging nature of the tax, and its applicability to derivatives, as a potential stumbling block.

Disagreements also exist on the allocation of tax revenues, notably between the French and the Germans.

Berlin currently refuses incorporating the money into the EU budget, opposing the creation of new "own resources" to finance EU expenditure. To them, the baseline must stay national.

Two birds with one stone

In contrast, France supports the idea of finding new "own resources" for the EU budget and sees as a way of decreasing its own national contribution to the bloc's finances, while keeping its pledge to rein in budget deficits.

The idea was to kill two birds with one stone, explained Cazeneuve: having a strong European budget and ensuring that countries keep their finances in order.

However, a French diplomat said that even the connection between the tax and the budget was not clear: "The link is not as automatic as that", he said, adding it was just one of a number of possible scenarios.

"I'm very sceptical about the fact that new member states could use the tax gains for the budget" and not others, echoed an official in the EU Council of Ministers.

Too late for 2014-2020 budget?

Member states have only just begun negotiations for their slice of EU funds for 2014-2020. For the moment, each country advances their pawns with no concessions in a bid to put pressure on the others.

All should become more clear during a planned EU summit on 22 and 23 November, which will allow countries to outline the global budget package, and its distribution amongst the main items of expenditure such as agriculture and regional policy.

For the French, the worst outcome would be that the discussions on a FTT package are not resolved by then and so cannot be taken into account for the EU's next long-term budget (2014-2020).

Socialist MP Gilles Savary is pessimistic that an agreement can be reached on time. A former MEP with intimate knowledge of the Brussels legislative machinery, Savary said it was now "too late" in the negotiation to have the FTT included in the EU's 2014-2020 budget.

Others say a delayed decision would not be dramatic. "Technically, an agreement can happen at any time," says a European Commission official. "Year X where the new own resource exists, we begin to apply it. The agreement on the financial framework [2014-2020] is in now way binding on the annual budget."

If a compromise were to be reached, the countries concerned would have to send a letter to the European Commission, who would subsequently set out a cooperation proposal to be adopted by the Council.

Meanwhile, France waits and hopes: the country is yet to make a decision on the EU budget for the next six years, or its own contribution.
Next steps:


22-23 Nov.: Special EU summit to take 2014-2020 EU budget discussions at highest level for the first time


By end 2012: France wants FTT in place among a select group of participating EU countries, using the 'enhanced cooperation' procedure

SOURCE: EurActiv.com, based on reporting by EurActiv.fr