Finance ministers to admit no consensus.
Member states that favour a financial transaction tax have to decide whether to press ahead with the idea for parts of the European Union, in spite of the implacable opposition of other states.
The European Commission’s proposal for a financial- transaction tax will be discussed by the 27 finance ministers of the European Union when they meet in Luxembourg tomorrow (22 June), with the dominant questions being whether such a tax is desirable or feasible if not all member states are on board.
Since the Commission proposed the levy in September, the issue has become very politicised, particularly in Germany, where the centre-left opposition has made Germany’s commitment to the transaction tax a condition of its support for ratifying the European Stability Mechanism (ESM), the eurozone’s rescue fund.
The UK, the Netherlands, Denmark and Sweden made clear their firm opposition earlier this year, and since then officials in the EU and national finance ministries have been working on alternative approaches. No consensus has emerged.
Some countries reject the idea outright, others favour a eurozone-only tax, and others take a “27 or nothing” stand. François Hollande, France’s president, has been the loudest supporter of the tax while Angela Merkel, Germany’s chancellor, has been reluctant to agree unless it is supported by all 27. In February, the finance ministers of nine eurozone governments put their names to a letter calling for a tax to be introduced as soon as possible Those finance ministers will not this week launch a formal request for ‘enhanced co-operation’ – the procedure under which a group of at least nine member states can go it alone – but they could announce that it is their intention to do so.
However, one senior EU official raised doubts over whether even nine countries would now be able to come to an agreement. “The narrower the group, the more difficulty it creates for others to participate,” he said, because they fear putting themselves at a competitive disadvantage.
Wolfgang Schäuble, Germany’s finance minister, presented a plan for a gradual approach to a transaction tax at an informal meeting of finance ministers in Copenhagen on 30 March; that suggested as a first step a levy on share transactions only. His document said that this should be “guided by the overall approach of the British stamp duty” or France’s tax on financial transactions, which does not include the trading of derivatives, before attempting to extend the taxation further. Schäuble’s proposal would be allowed under enhanced co-operation but the alternatives, such as a financial activities tax, would not, because it would be too different from the Commission’s initial proposal, which suggested a 0.1% levy on share dealings and 0.01% on the trading of other financial products.
A spokeswoman for the Commission said that it would support member states if they wanted to follow the enhanced co-operation route. Economic reform Finance ministers will also discuss the Commission’s country-specific recommendations for economic reform at tomorrow’s meeting.
The Commission issued a set of proposals for each EU member state on 30 May, based on assessments of their economic situations, and including recommendations on issues such as tax policy, pension age and competitiveness. It is understood that some national governments want the Commission to redraft aspects of the reports. Finance ministers will also formally agree to remove Hungary and Bulgaria from the excessive deficit procedure and lift the suspension of cohesion funds to Hungary because of the country’s progress in correcting its public deficit.