European finance ministers have paved the way for the EU to introduce a financial transaction tax (FTT) through the process of enhanced co-operation.
The tax was agreed by 11member states during a meeting of the economic and financial affairs council in Brussels on 22 January.
The member sates that agreed to the tax are Austria, Belgium, Estonia, France, Germany, Greece, Italy Portugal, Slovenia, Slovakia and Spain. It is strongly opposed by the UK, as well as Ireland, which currently holds the six-month presidency of the EU.
Other member states are free to join the FTT if they please.
The FTT proposes a harmonised tax rate of 0.1% on transactions on all types of financial instruments, excluding derivatives, which will be taxed at 0.01%.
According to a council statement, the tax will allow the financial industry “to make a fair contribution to tax revenues, whilst also creating a disincentive for transactions that do not enhance the efficiency of financial markets”.
The tax was widely welcomed by European politicians, although, as media reports suggest, a European Commission proposal on the tax will drag the debate out longer, as countries haggle over the precise technical details. However, a positive note was struck by European Commissioner for Taxation, Algirdas Šemeta, who called the agreement “a milestone”.
The German finance minister, Wolfgang Schäuble said “the financial sector should share the burden of costs of the financial crisis in an appropriate way” adding “we have come a good way closer to this goal”.
The President of the Party of European Socialists (PES), Sergei Stanishev also said that financial institutions should be the ones to aid European economic recovery, saying all member states “should take note of this positive step and remember that ordinary citizens still expect those who caused the crisis to become significant financial contributors to the solution”.
In the European Parliament, which voted for the introduction of an FTT last year, will be involved in the consultation process with council and will vote on the tax, most likely during the June plenary session.
Meanwhile, development NGO, Oxfam have called for the FTT to be a ‘Robin Hood’ tax by devoting large sections of its garnered revenue to the world’s poor. According to Nicolas Mombrial, Oxfam’s EU policy adviser, “by tackling the worst excesses of casino capitalism, the FTT can stem the tide of growing inequality and make the financial system work for the whole
of humanity rather that a global elite. But it will only be a Robin Hood Tax if a big chunk of the estimated €37 billion annual revenue is used to help poor people at home and abroad
who have been hit hardest by the economic crisis and climate change”.