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EU Financial-Transactions Tax Faces More Delays
Governments Remain Divided on Key Details
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By TOM FAIRLESS
Updated Dec. 1, 2013 11:30 a.m. ET
BRUSSELS—A European plan to tax a sweeping range of financial transactions is
facing new delays even after winning the support of Germany's biggest political parties,
as participating governments remain divided on key details of the levy.
Berlin's decision to push for a tax that would cover currency transactions could
complicate negotiations, because the European Union's executive arm has warned that
such a move would violate the free movement of capital in the EU.
France, Germany and nine other countries are pushing ahead with a European
Commission proposal to impose a levy on stock, bond and derivative trades, after
discussions broke down a year ago on a European Union-wide financial-transaction tax.
But at their first meeting in almost three months on Wednesday, representatives of the
11 states agreed that the tax wouldn't come into force until 2015 at the earliest, two
people familiar with the discussion said.
The tax was originally supposed to be implemented on Jan. 1, according to the
commission's proposal in February, but the commission said in June that the timeline
had slipped by at least six months.
"Given that [the 11 states] still need to draw up a compromise text, and then agree to it
at the level of finance ministers…2015" is a more realistic date, an EU official said.
EU finance ministers aren't expected to discuss the tax when they meet in Brussels on
Dec. 10, as they focus instead on finalizing a plan to centralize control of failing eurozone banks—the next step in the bloc's banking union project, EU officials said.
The tax aims to discourage speculative trading and ensure that the financial sector pays
back part of what it received from taxpayers during the financial crisis. Under the
commission's proposal, a 0.1% levy would apply to share and bond trades and 0.01% to
derivative transactions between financial institutions, if at least one party is located in
Negotiations had been on hold since Sept. 9, in part as national governments waited on
the outcome of Germany's Sept. 22 general elections. Chancellor Angela Merkel's
conservative CDU party won but failed to secure an absolute majority of seats, forcing it
into coalition talks with the socialist SPD party.
But the talks had also been making little headway before September, as the 11 states
remained divided over fundamental issues, including the scope of the tax and how to
distribute the revenue. Meanwhile, EU lawyers suggested in early September that the
plan would violate the rights of member states that didn't sign up and could breach EU
The legal service of the European Council, the body that represents member states,
took issue with a central aspect of the latest planthat the levy must be paid if one of the
counterparties to a trade resides in a participating EU member state.
The commission responded that it "strongly disagreed" with the council's legal opinion,
which isn't binding, and would press ahead with work on the tax.
In recent days, the talks regained some momentum after Germany's two main political
parties pledged in their coalition treaty to "swiftly implement" a broad tax covering
"shares, bonds, investment certificates, currency transactions and derivative contracts."
In addition to the reference to the controversial currency trades, the coalition treaty also
contains a significant caveat: that the tax should be structured so as to avoid "negative
effects on pension instruments, small investors and the real economy."
That concern is shared by a number of governments, which worry about the impact of
such a sweeping tax on Europe's still-weak economy and sovereign-bond markets, as
well as on pension funds and personal savings.
The financial-services industry, which has lobbied furiously against the plans, published
two studies in November underlining the potentially damaging impact of the tax. The
first, by PricewaterhouseCoopers, found that the tax might reduce gross domestic
product growth by between 0.3% and 2.4%, based on past studies, while the second, by
Oliver Wyman, estimated it would cost pension funds and insurance companies up to
€50 billion each year.
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The U.K. government began a legal challenge to the tax earlier this year, amid fears it
would be expensive to collect and risk driving business away from London's financial
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At Wednesday's meeting, France and Italy continued to push for a watered-down
version of the proposal that would more closely resemble their own national financialtransaction taxes, an approach that was also supported by Spain, a person familiar with
the discussion said. By contrast, a number of smaller countries argued that the tax
should cover as broad a range of instruments as possible, the person said.
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Germany took a back seat at the meeting as its representatives awaited more specific
instructions from Berlin, where the new government isn't likely to be in place until Dec.
17, a person familiar with the discussion said.
Earlier this year, a consensus appeared to be building around starting with a morelimited tax on share trades, similar to Britain's stamp duty, which could be expanded
later, according to participants. The U.K.'s stamp duty covers only sales of stock in
companies incorporated in the U.K.
Representatives of the 11 governments are scheduled meet again on Dec. 12 to
discuss the plans.
Write to Tom Fairless at firstname.lastname@example.org
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