Robin hood tax political update june 2012


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Robin hood tax political update june 2012

  1. 1. Robin Hood Tax Political Update June 2012Jasmine Burnley and Richard CarrShaping an international deal on FTTSummary • Germany signals it will abandon the push for an EU wide 27 FTT, opening up the way forward for Member States to vote down the EU 27 option and agree on a smaller coalition of the willing (representing 90% of Eurozone GDP) FTT at the June 22 meeting of European Finance Ministers • New French President Francois Hollande raises the FTT in key international fora and continues to press heavily for a European FTT. • The European Parliament has voted in favour of a FTT. Though the vote was non-binding the issue may well become live at the ECOFIN meeting of 22 June. • Thousands of nurses march in Chicago calling for an FTT as leaders meet at the G8 Summit in Camp David (18-19 May) and the Global FTT Week of Action (15 May-23 May) saw support (and headlines) around the world (35 countries) for an FTT. 500 blogs covered the week’s events. • FTT to be raised at G20 Summit in Mexico (18-19 June) and Rio+20 Earth Summit in Brazil (20-22 June)EU DevelopmentsAgainst the backdrop of growing noise on an FTT in the US where new French PresidentFrancois Hollande raised it with Obama at the G8 Summit in Camp David, Europe hascontinued to dominate the FTT landscape. France and Germany remain important drivers:Hollande’s victory in the French Presidential elections in early May has propelled a key advocateof the FTT into office, and crucially, Merkel’s recent signal that Germany is willing to abandonpursuit of an EU 27 option and officially throw its weight behind achieving an FTT in a smallergrouping of countries has meant an FTT before the end of June is increasingly likely. Exactlywhen and how this will happen is not altogether clear, but German pressure for a vote on the EU27 option at the meeting of Finance Ministers on 22nd June means there is now a strongpossibility that the EU wide EC proposal will be voted on there. The key blockers on an EU 27deal remain the UK, Sweden, the Czech Republic and Malta and the short-term goal is to getthese blockers to move aside opening up the way forward for a smaller coalition of the willing togo ahead with their own FTT through either an Enhanced Cooperation procedure orIntergovernmental process.There is a possibility that some Member States at the Ecofin may offer up alternatives such as theFinancial Activities Tax as an EU wide alternative to the broader tax proposed by theCommission and that one of these options could be supported over a smaller coalition of thewilling FTT. This would be a poor compromise. A more comprehensive FTT along the lines ofthe Commission propsal, supported by the 9 Member States that have pressed for faster progresson the FTT and who represent almost 65% of total EU GDP would alone raise around €40bn,and such a tax would do a much better job of curbing damaging speculative behaviour in themarkets. It is vital that governments continue to hear from us that the compromise options ofthe FAT or a limited FTT on share transactions alone are not good enough.   1  
  2. 2. The nine countries1 which signed the February letter pressing the Danish Presidency to fast-trackthe FTT continue to be broadly supportive with some wavering from Finland but with Slovakia,too in favour. But significant swingers remain. Denmark continues to sit on the fence, preferringto back an EU wide FTT. The Netherlands, whose finance minister had come out against a FTT,has seen its coalition government fall after the right wing freedom party refused to continue tosupport the administration after its attempt to slice 16bn euros from the budget. Prior to a newelection, the leftist parties (which support a FTT) are polling well which opens up the possibilityof their joining a coalition of the willing.2 Latest intelligence suggests the Netherlands is atpresent against any form of FTT (though they are extending their bank levy), even one whererevenues are only used for domestic rather than international development/climate changepurposes. Things may change in the coming months however.The biggest risk now is that all of the revenues from a European coalition of the willing FTT willgo into tackling deficit reduction and stimulating growth. Hollande’s Europe Minister recentlystated in a radio interview that Hollande supports the principle, reinforcing Hollande’scommitment to allocate up to 30% of the revenues from an FTT to development and climatechange in a Liberation op-ed back in February.3 But no such statement has been forthcomingfrom Germany since Merkel’s own comments back in December 2011. There are severalopportunities in the coming weeks to get leaders and influentials coming out in support of anFTT which goes to tackling poverty at home and abroad and addressing climate change,including the G20 Summit in Mexico (18-19 June) where Hollande has signalled he will raise theissue of an FTT (see below) and the Rio+20 Summit on 20-22 June, where Hollande will alsodiscuss the FTT (see below).Whilst Finance Ministers meet in Brussels, the leaders of the four most powerful economiesbacking an Ehanced Cooperation FTT will also meet on 22nd June in Rome, where Merkel,Hollande, Monti and Rajoy will again discuss growth enhancing policies including the FTT.Another key moment following this and the Ecofin meeting on 22nd June, will be the EuropeanCouncil meeting on 28-29th June, where leaders will meet to rubber stamp decisions taken by theFinance Ministers the week before and thrash out the remaining thorny questions around thecrisis in Europe. It is not yet clear how important the leaders summit will be for the FTT.Leaders may simply reiterate the decisions of the Ecofin, or they may go further in signallingwhat will happen next as Cyprus takes over as new President of the European Union. Either way,in this crucial window of opportunity civil society needs to keep the pressure on both Merkel andHollande to publicly state that a proportion of the tax must go to tackling poverty and climatechange. With a European FTT now just around the corner, the stakes on this front are higherthan ever.European ParliamentThe FTT was strongly supported in the European Parliament when on 23 May MEPs voted 487to 152 in favour of adopting a positive opinion on the FTT. Although this vote was non-bindingbecuase it was a tax matter, it was a strong signal of the overall depth and breadth of politicalsupport for a European FTT. The ECON - the Economic and Monetary Affairs Committee of                                                                                                                          1 Austria, Belgium, Finland, France, Germany, Greece, Italy, Portugal and Spain2In the Netherlands the radical Socialist Party has the FTT at the forefront of its programme. The PvdA (labour party)and Green Left party have the FTT in their programmes too, but would likely rely on the support of others to form agovernment.3 27 February, Liberation   2  
  3. 3. MEPs - report on the EC proposal also expressed support, though adding the followingamendments:4 • the addition of an “issuance” principle – obliging financial institutions trading outside the EU to pay the tax if they trade securities initially issued within the EU – to the already included “residency” principle – allowing any securities to be taxed should they be traded by an EU based institution. • Pension funds would see the tax waived on their transactions • The opinion does not request that monies raised would be added to the EU budget, but does point out that if they were this could reduce contributions by 50%The ECON report also, it should be noted, refers to the Avinash Persaud/Stephany Griffith-Jones research which indicates that an FTT would have a 0.25% positive impact on growth.5The growing Isolationism of the UK...As in other European matters, David Cameron’s stance on the FTT has (if this was possible)hardened further after the EU summit in late-May. Having mentioned that there were ‘goodinnovative ideas that can help growth,’ he proceeded to label a FTT as a ‘bad idea’ and suggestedit would put up the cost of people’s insurance, put up the cost of people’s pensions and cost‘many, many jobs.’ He would, he claimed, ‘fight it all the way.’Around the same time, the Bank of England published a paper on May 28 detailing The implicitsubsidy of banks. Whilst the authors argued that it was hard to quantify exactly how large thesubsidy from the government was,6 they estimated . an implicit subsidy in 2010 of anythingbetween £30bn to £120bn – a significant figure even at the lower end of the estimate scale.7 Meanwhile, an IPSOS Mori poll for the RHT revealed that 77% of the British public do notthink the government has done enough to ensure that we are ‘all in this together’ with 71%believing that banks and the financial sector are “not being asked to pay their fair share”,showing how distant Cameron’s position of defending the City at all costs is from the public’sviews on who needs to pay for the crisis.8US CampaignAs part of the Global Week of Action on May 18 more than 3,000 nurses gathered in Chicago tocall for a Robin Hood Tax. The Wall Street Journal made the link between the FTT and a bettercapitalism: ‘even if they are calling for an FTT, at least the left are talking growth.’9 Meanwhile,new President Francois Hollande took the issue right to the top in his first international meeting,by raising the issue of the FTT in a bilateral meeting with Obama at the time of the G8 summitin May.                                                                                                                          4 As a tax matter, these amendments – as the bill itself – are non-binding.5 They also slightly hedged as to how this subsidy should be calculated. Two methods were proposed. The first was theimplicit subsidy gained by the cheaper lending rates gained by the implicit guarantee that a government would not let amajor bank fail. The second was calculated through the sums governments would be prepared to invest to bolsterbanks capital holdings should they dip below a given threshold.7   3  
  4. 4. Rest of the WorldThroughout the Global Action Week Robin Hoods gathered on Mount Fuji in Japan, outside BigBen in Britain, in Italy, India, Brazil, Zambia, Malawi, Belgium and more – representing amovement of millions spread across five continents.Key issues ahead:Though the middle of June is far from a be all and end all, it is a crucial window of opportunityto get a FTT high up the political agenda for a number of reasons. The key dates are below.18-19 June – G20 meeting in MexicoAlthough the FTT is not on the formal agenda of the G20 and no agreement is anticipated,Francois Hollande is again expected to raise the issue of the FTT at the G20 summit in Mexicoin June, both in public and private. Given this will occur days before the Ecofin meeting, andthat last time G20 leaders discussed the FTT it was supported by several G20 members (Brazil,Argentina, South Africa) and discussed in the context of financing for development and climatechange, it could well be a timely and important intervention and it will be important to capitaliseon any signs of movement that come out of this.20th-22 June – Rio + 20 meetingHot on the heels of this, and prior to the Ecofin gathering, the Rio+20 will see world leaders,ministers, NGOs and others gather to discuss climate change, sustainable growth and otherrelated issues. Hollande will now attend this summit and has signalled that he will make someform of statement on the FTT there. His new Development Minister Pascale Canfin, will alsoattend the meeting of the Leading Group on Innovative Finance, taking place on 22 June in themargins of the Rio summit, where the FTT will also feature. Civil society will also be keeping theFTT firmly on the agenda at Rio – see below for a list of key events and activities:19 June – 9.30-11.30h, Workshop, ‘Global FTT: a just solution for human development,’Sindicato de Bancarios Avenida Presidente Vargas 502 - 13-14h, FTT Stunt, Avenia Almirante Barroso 2520 June – Press conference (tbc)The hashtag for all FTT related activity will be #FTTRio.This then, is a crucial few weeks in the battle for an FTT. The ECOFIN meeting on 22 June is areal opportunity to see a meaningful development – the move from an EU-27 to enhancedcooperation method of delivering some form of European FTT. Whilst neither the exactoutcome of that meeting nor the next steps are yet clear, we can say with certainty that the nextfew months will form a crucial stepping stone in moving towards a comprehensive EuropeanFTT. Now is the time to ratchet up the pressure on governments and get a concrete commitmenton an FTT with a good proportion of its revenues committed to development and climatechange.ENDS   4