Finance Ministers Fail to Agree on EU Financial Transaction Tax
U.K. Chancellor of the Exchequer George Osborne
Jock Fistick/Bloomberg
U.K. Chancellor of the Exchequer George Osborne, seen here, said, “It’s difficult to see how in practice a financial transaction tax would work.”
U.K. Chancellor of the Exchequer George Osborne, seen here, said, “It’s difficult to see how in practice a financial transaction tax would work.” Photographer: Jock Fistick/Bloomberg
Banks escaped a tax on financial transactions after the U.K. and other countries undermined plans to use the levy to help repair the damage to national budgets caused by the banking crisis.
“It’s difficult to see how in practice a financial- transaction tax would work,” U.K. Chancellor of the Exchequer George Osborne said in Brussels after a meeting with EU finance chiefs. “It’s been discussed for many decades past and I suspect it will be for many decades to come.”
German Chancellor Angela Merkel, with support from France, called for a tax on banks’ financial transactions to repair holes in government coffers caused by funding lenders during the crisis that followed the 2008collapse of Lehman Brothers Holdings Inc. European governments approved $5 trillion in bank bailouts and loan guarantees during financial crisis, according to EU data.
While a transaction tax is “technically doable, it’s practically difficult,” French Finance Minister Christine Lagarde told journalists in Brussels. “It’s politically desirable and it’s financially unpredictable.”
Two forms of the proposed tax were discussed at today’s meeting. One would apply to financial transactions, such as share or bond purchases; and the other, known as a financial- activities tax, to bank profits and remuneration.
Future Growth
Ministers would reject a tax that would “destroy a machine which should finance future growth,” Finnish Finance Minister Jyrki Katainen said in an interview with Bloomberg TV’s Francine Lacqua.
German Finance Minister Wolfgang Schaeuble defended the concept while saying Germany wouldn’t impose such a tax unilaterally.
“The financial transaction tax can partially answer the question how the burdens of financing public coffers can be shared in a proper and fair way,” Schaeuble said. “The technical problems aren’t insurmountable.”
Ministers also discussed proposals that would see banks pay a levy on the size of their balance sheets, with the proceeds going to European funds to cushion the blow of future crises on national budgets.
“There’s a significant body of opposition to a European resolution fund,” Osborne said. “I’m quite comfortable that the U.K.’s position is strong on this and we have plenty of allies around the table.”
Finance chiefs “agreed to continue to work on technical issues,” EU Taxation Commissioner Algirdas Semeta told a press conference in Brussels. There needs to be “huge and in-depth technical work” on tax proposals like this, he said.
Michel Barnier, the EU’s financial services commissioner, called the discussions “encouraging.”
To contact the reporters on this story: Ben Moshinsky in Brussels at bmoshinsky@bloomberg.net;
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