On Monday, Finance Ministers for 10 European Union nations met with the purpose of finalizing work on a proposed financial transaction, or Robin Hood, tax.
While there’s still work to be done, Pierre Moscovici, the European Commissioner for Economic and Financial Affairs, Taxation and Customs, expressed his enthusiasm for the progress achieved.
Following the OECD’s input and research done by working groups on “the main sticking points—the treatment of derivatives on sovereign debt and how to make the tax cost-effective,” the EU’s Tax Commissioner believes “a final agreement has never been closer.”
Moscovici said, “The ten participating Member States have…made excellent progress on the Financial Transaction Tax and agreed on the four basic features which will form the backbone of the tax.”
“My services, together with the technical group of the participating countries, will now draft a legal text on which we’ll be seeking political agreement over the next weeks,” he added.
Furthermore, German Finance Minister Wolfgang Schaeuble said, “The countries that had reservations last time have withdrawn them, so some countries now want to take a look at the possible consequences of the [final] text.”
“We want to have a decision by year-end, a positive one, if possible,” he added.
For the past three years, Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain have been engaged in negotiations to set up this tax after the original proposal brought up back in 2011 failed to elicit much excitement from the EU’s twenty-eight Member States.
This initiative aims to develop “levies on stock, bond, derivative and other trading as a way to curb financial speculation and get the industry to make a “fair contribution”—projected at 57 billion euros a year—to state budgets.”
Under these renegotiated terms pitched by Austria, several items have been agreed to per a Bloomberg article on the meeting:
- “Harmonized taxation would initially be applied to transactions of stocks issued in one of the participating countries.”
- “All shares would be taxed after a transition period unless participating member states decide otherwise.”
- “All derivatives” will be covered, “though initially products with public debt to 100 percent as direct underlying would be exempt.”
- “Repurchase agreements, which are used for short-term financing, as well as transactions of public debt managers would also be excluded.”
- “Market makers, who provide liquidity, would be subject to reduced tax rates.”
A final deal is expected by the end of 2016.
Will the Financial Transaction Tax Survive?
Despite these advancements, several pundits believe the Robin Hood Tax is a terrible idea.
Mark Gilbert, a columnist for Bloomberg View, says that the financial transaction tax in Europe is “unworkable, unwarranted and unwanted.”
Despite this recent meeting’s success, Gilbert’s thoughts (published only a month ago) might still hold true.
According to Gilbert, there are several problems with the financial transaction tax.
First, he writes, “the need for a coordinated policy change is one problem; if Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain go it alone, traders and investors will simply move their buying and selling to different jurisdictions that don't charge them for the privilege.”
Second, “the tax would indiscriminately penalize all market participants, be it farmers protecting their livelihoods in the agricultural futures market, savers already punished by zero interest rates putting money aside in the stock market for retirement, or traders speculating for profit.”
Third, Member States might not make any money from this experiment. Gilbert asserts that “the claim that the revenue raised would go into the coffers of participating countries is false; there's general agreement that a corresponding decline in gross domestic product erodes the wider tax take, meaning no net revenue is generated.”
Do you think the financial transaction tax will ever make it into law? Or, as predicted by Mark Gilbert, will it be “reduced to zombie status, wandering the corridors of Brussels”?