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France tries to unblock European FTT
negotiations
Published: 04/11/2014 - 15:46
Michel Sapin has tried to move the FTT debate forward. [Parti socialiste/Flickr]
French Finance Minister Michel Sapin has urged his European
counterparts to make derivatives play a very small part in the tax base
for the Financial Transaction Tax. Sapin hopes this will unblock
negotiations on the project, which has been at an impasse for 2 years.
EurActiv.fr reports.
The European Financial Transaction Tax is at a standstill. The thorny subject
was taken off the agenda of the latest Ecofin Council in October, and did not
feature in the meeting of French and German Finance Ministers on 20
October in Berlin.
The dossier will make it back onto the agenda for the meeting of EU Finance
Ministers in Brussels on 7 November, and the member states have given
themselves until the end of December to define the scope of the European
tax, which they hope to launch in 2016.
"French mini-tax"
The Financial Transaction Tax has been in force in France since 2013.
Considered a "mini-tax" by some, the FTT takes 0.2% on share purchases.
At a press conference organised by several French NGOs, Arielle Malard de
Rothschild, Managing Director of Rothschild and President of CARE France,

2. said "I do not think the tax we have put in place in France is a model for
efficiency. It will have to evolve in line with the European FTT negotiations."
And with good reason. While the French FTT is only expected to raise
around 800 million euros this year, a tax applied to shares, bonds and
derivatives across the 11 European countries involved could see its
revenues soar.
Depending on the scope of the FTT, it could raise between 9.6 and 24.4
billion euro per year in France, according to estimates from the consulting
firm SIA Partners.
The Copenhagen Institute estimates that FTT revenues in Germany could be
between €17 and 28 billion.
French ambiguity
If the advantages in terms of revenue are plain to see, the French
government is eager not to push the FTT too far, fearing that traders will
make their financial transactions elsewhere, causing a collapse in the
derivatives market, a very important sector for French banks.
>> Read: Financial lobbies angry at FTT (in French)
"France is one of the greatest advocates of the Financial Transaction Tax,
but also one of the main opponents of making it an ambitious tax," said
Alexandre Naulot, of Oxfam France. "The enhanced cooperation is now at
risk because of the French position," he added.
In an editorial published in Les Echos on 4 November, the French Finance
Minister, Michel Sapin, put forward a compromise whereby shares and
bonds would be taxed at 0.1%, and derivatives at 0.01%, a less ambitious
project than the initial European Commission proposal.
The Minister said that an agreement "is within reach," and proposed "taxing
transactions on quoted shares [...]. States could extend the tax to unquoted
shares if they so wished". Sapin also recommended applying the tax to only
the most speculative of derivatives: the CDS, or Credit Default Swap.
Residency vs place of business
Another new proposal put forward by the Finance Minister was that the tax
should be collected on transactions issued by companies "based in one of
the 11 participating countries [...] regardless of where the transaction takes
place or where the financial intermediary is based".
Some members of the enhanced cooperation group, particularly the
smaller member states lacking in large businesss, would prefer the tax to be
collected in the country where the transaction takes place. This would allow
them to benefit from the FTT.
To reassure these smaller countries, the French Minister proposed the
application of a "residency principle" to decide who collects the tax. In the

3. case of a "Portuguese bank buying shares in a French business, the
proceeds would go to Portugal; if these same shares were bought by a
French bank, or a bank from outside the 11 participant countries, the
proceeds would go to France," he explained.
2014 target increasingly remote
The meeting on 7 November may be the last chance for the 11 member
states participating in the enhanced cooperation project to keep their
objective of reaching an agreement by the end of the year.
But the chances of an agreement being signed by the end of December
appear slim. According to an internal document from the German Federal
Ministry of Finance, there is still "quite a distance" separating the positions
of the member states. This means the target date of the end of December
2014 will be "difficult, if not impossible to achieve," the document said.
TIMELINE:
7 November: meeting of Ecofin Council in Brussels
End of December 2015: provisional date for obtaining a compromise
on FTT
2016: implementation of FTT
EXTERNAL LINKS:
European Commission
Proposal of 14 February 2013... and the way ahead
Initial proposal of 28 September 2011... and its fate
Is the FTT as proposed in compliance with international taxation and
European law?
Press
Taxing financial transactions: up to 24 billion to be gained (in French)
- Challenges - October 2014
Editorial by Michel Sapin: Financial Transaction Tax: let's stop
prevaricating (in French) - Les Echos - October 2014
Institutes
A European Financial Transaction Tax, Revenue and GDP effects for
Germany - Copenhagen Economic - March 2014
EurActiv.fr | Cécile Barbière (translated from French by Samuel White )
Sections:
EURO & FINANCE
People:
MICHEL SAPIN
Locations:
FRANCE EUROPE

4. Topics:
FINANCIAL TRANSACTIONS TAX (FTT)