During the financial crisis, banks were saved with large amounts of taxpayer money. However, there are still no taxes on financial transactions in most EU countries. This is why the European Commission and some EU Member States decided to introduce a EU-wide Financial Transaction Tax (FTT).
The introduction of an FTT wants to make sure that the financial sector makes a fair contribution to the cost of this crisis und possible future ones. Those who benefit from profits at the financial markets should also cover the losses. So far, it is not decided how the tax revenue would be used. Most probably the gains will be used as an EU-owned resource reducing national contributions to the EU budget.
In 2011 Algirdas Šemeta, former EU Commissioner for Taxation and Customs Union, proposed the first draft for an FTT. However, the proposal could not get the required unanimous support by all EU Member States. Especially the UK did not want to take part because the City of London feared big losses through the tax. That's why Commissioner Šemeta came up with a new proposal under the so-called "Enhanced Cooperation" procedure: This allows those members states that wish to continue to work more closely together to do so. Accordingly, eleven EU countries decided to introduce an FTT: Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain.
The plan is to tax shares and bonds with a rate of 0.1% and derivatives with a rate of 0.01%. The FTT shall start with a tax on shares and some derivatives as a first step and further steps are to be taken when the impact of the tax on European economies is clearer. Member States that already have a further-reaching national FTT would be able to keep it. When introduced by the eleven Member States, the FTT was expected to gain revenues of 30-35 billion euros a year.
The new proposal is still discussed by Member States, especially the scope of derivatives included in the tax scheme is a controversial issue, as well as the so-called taxation principle: There is no agreement yet, whether the tax is taken on the basis of the "residence principle" (The FTT would be based on residence of the financial institution or trader), the "issuance principle" (whereby financial institutions located outside the EU would also be obliged to pay the tax) or some combination of both. Furthermore, some Member States would like to get an exemption from the FTT for shares of smaller and non-listed companies.
The European Parliament has published its opinion, only having consultation rights in this special procedure. Currently, the FTT dossier lives the life of a zombie policy: it was never really alive, but it is not dead either. This initiative has been discussed for years now, and may stay on life support for the years to come.
In December 2015 ten euro zone countries agreed on some aspects of a harmonized FTT and gave themselves until the middle of 2016 to reach agreement on remaining issues. This did not happen, so work will continue througout 2017. Estonia had dropped out of the club of the undead and Belgium is about to change its mind as well. If two or more countries drop our, the zombie would finally be dead, since the "Enhanced Cooperation" procedure needs to be backed by at least nine Member States.
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