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Council Of The European Union Economic And Financial Affairs Council - Financial Transaction Tax: First Technical Reading Completed

Date 14/03/2012


 

Margrethe Vestager, Danish Minister for Economic
Affairs and the Interior, at the meeting on 13 March
© European Union, 2012

 

On 13 March 2012 the Economic and Financial Affairs Council took stock of the work done on the proposal for a directive on the EU-wide financial transaction tax. The ministers identified the outstanding issues and discussed the next steps.

 

The Danish Presidency concluded that the first technical reading of the proposal had been completed.

In its report to the ministers the Presidency noted that a whole range of sensitive issues remains to be addressed. Among those issues are specific questions regarding:

- the tax base (coverage of currency derivatives and government bonds and its impact on the costs of hedging and government borrowing; coverage of pension schemes and its impact on business models used in various member states, etc.);
- structure of the rates and persons liable to tax;
- more general questions regarding the impact on the economy, the risks of relocation outside of the EU, enforcement of the directive vis-à-vis non-EU financial institutions and delegated acts.

"It was a very fruitful and very constructive discussion. I guess that the different views on the proposal itself are well known, but there was an atmosphere of compromise and trying to find ways," said Danish Minister for Economic Affairs and the Interior Margrethe Vestager, who chaired the meeting.

The Council will continue its technical analysis in order to look at all the aspects of the proposal and their implications in practice.

Additional meetings will be organised by the Presidency, which intends to start exploring possible compromise proposals to prepare for a discussion by the ministers, planned to be held before the end of June.

The member states will continue to look into ways to advance the work on this politically and economically important issue.

EU decision-making on tax issues requires unanimity voting in the Council, after consulting the European Parliament.

Main points of the Commission proposal

The proposed financial transaction tax is designed to ensure that the financial sector makes a fair contribution to public finances.

In addition, it should provide a disincentive for the financial industry to undertake high-risk activities that in certain circumstances can seriously damage the real economy.

Finally, it aims to ensure that there is no fragmentation of the internal market or distortion of competition, as a number of national measures of a similar nature are already being put in place.

The draft tax covers a wide range of financial transactions involving stocks, bonds and derivatives. The member states would be setting the actual tax rates themselves, taking into consideration the established minimum rate, which is 0.1% for shares and bonds, and 0.01% for derivatives. It is up to the member states to establish reporting obligations, and prevent evasion, avoidance and abuse.

The proposal stipulates that the tax would be applied in accordance with the residence principle, i.e. the tax would be levied in the member state of establishment of the financial institution, not in the place where the transaction was carried out.

The Commission estimates that the yearly revenue generated from the tax could amount to around EUR 57 bn. It proposes that it could gradually, either wholly or partially, replace member states' contributions to the EU budget.

The Commission proposed the tax in September 2011.

More information:
Taxation of the financial sector (on Europa website)

Council public debate (video, several languages)
Presidency's report on the state of play (pdf)
Press release (pdf)
Press conference (video, several languages)