European Union finance ministers have given 11 nations a final go-ahead to launch a controversial financial transactions tax seen by many as a way of making the finance sector pay for the economic crisis.
“For the first time ever, the financial transaction tax will be applied at regional level,” said the EU’s tax commissioner Algirdas Semeta after the ministers gave their green light.
The new tax will be “a milestone”, the commissioner said. “A block representing around two-thirds of EU GDP (gross domestic product) will implement this fair tax together, answering the long-time calls of their citizens.”
The European Commission and European Parliament gave their blessing to the introduction of an FTT, respectively in October and November.
The 11 were authorised to go ahead with the planned levy under what is known as “enhanced cooperation”, a rare procedure enabling a minimum of nine EU nations to work together without the rest of the 27 EU states when there is no general agreement.
Enhanced cooperation was first used in the field of divorce law and was last year approved a second time in the field of patents. This will be its third use.
Britain notably was opposed but did not stand in the way of the creation of an FTT, initially proposed by France and Germany, then joined by Austria, Belgium, Estonia, Greece, Italy, Portugal, Slovakia, Slovenia and Spain.
The 11 euro zone states will now need the European Commission to draft legislation enacting a tax that is expected to call for a harmonised minimum 0.1 per cent tax rate for transactions in all types of financial instruments, except derivatives, at 0.01 per cent.
The tax aims to curb the market excesses that led to the 2008 global financial crisis but the notion failed to gain overall EU support, in part due to British concerns over the City of London’s future.
As many hailed a step forward to the introduction of a so-called “Robin Hood tax”, Oxfam said “the historic vote sends a clear message that Europe’s biggest economies are ready to make the financial sector pay to clear up the mess it helped to cause.”
“It is indeed about time that the financial institutions contribute to the repair of the crisis that they have triggered,” said the leader of the Socialist group in the European parliament Hannes Swoboda.
Junior French Finance Minister Benoit Hamon welcomed Tuesday’s approval as “an important step” in “beginning to design a world post Lehman-brothers,” in reference to the US investment bank that collapsed in September 2008.
And in Berlin, German Finance Minister Wolfgang Schauble said “the financial sector must be associated in a reasonable way to the costs of the financial crisis.”
Tuesday’s green light was “a good step towards that aim,” he added.
But what to do with the proceeds is likely to cause discord.
France and Austria have suggested a part of the tax could finance “an education fund” in the EU but Germany is opposed to the proceeds being handled by the EU.
“It will involve significant negotiations among the member states,” said Ireland’s Finance Minister Michael Noonan. “We act as honest brokers.”
Oxfam estimated the tax could bring in 37 billion euros annually, and that if half went to development it could help 550 million of the world’s poorest people to access free healthcare.