The European Union’s tax commissioner urged U.S. supporters of a financial transaction tax to keep up their efforts and said a global tax should be a reality at “some time.”
“I believe that things can evolve,” Algirdas Semeta said yesterday in a speech at the Center for American Progress in Washington. “Nowadays, every government needs new sources of public funding.”
So far, 11 countries have signed up to work toward the EU’s tax. The plan would impose a wide-ranging levy on trades of stocks, bonds, derivatives and other financial instruments, to raise revenue and discourage speculative trading.
The U.S. Treasury Department opposes the EU tax, warning about the effects on U.S. investors. Payson Peabody, managing director and tax counsel at the Securities Industry and Financial Markets Association in Washington, said his group agreed a tax could harm U.S. investors.
Despite skepticism from the U.S. and other countries, Semeta said in an interview that the EU would build momentum toward a global tax.
“Somebody has to start to demonstrate that it could work,” he said.
Semeta met yesterday with Lael Brainard, Treasury’s undersecretary for international affairs. Brainard expressed concern at the meeting about the potential effect on U.S. investors of the tax proposal, and said she hoped it would “evolve so it does not have adverse cross-border impacts” Holly Shulman, a Treasury spokeswoman, said in a statement.
Some Democratic lawmakers in the U.S., including Senator Tom Harkin of Iowa and Representative Peter DeFazio of Oregon, back implementing similar tax proposals in the U.S. Semeta said he will meet today with both lawmakers, whose proposal has gained little momentum in Congress or with President Barack Obama’s administration.
“The administration has consistently opposed a financial transactions tax on the grounds that it would be vulnerable to evasion, create incentives for financial re-engineering, and burden retail investors,” Jack Lew, Obama’s nominee for Treasury secretary, said in response to a written question from Orrin Hatch of Utah, the top Republican on the Senate Finance Committee.
Transaction taxes “have an outsized impact, negative impact on growth and jobs,” Peabody said. “And we think that policy makers on both sides of the aisle understand that.”
The proposed EU tax would set a rate of 0.1 percent for stock and bond trades and 0.01 percent on derivatives trades. The EU estimates that the plan could raise 30 billion euros ($40 billion) to 35 billion euros annually.
To become law, the proposal must be approved by the EU nations that agreed to consider imposing the tax. They now include Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia.
International financial institutions won’t be able to avoid the tax because they won’t want to pull out of all of those countries, Semeta said in the interview. He added that the U.S. concerns show that the tax won’t lead companies to relocate to jurisdictions without the levy.
“It demonstrates that the tax is well-designed and it will not lead to the shifting of transactions to other countries,” he said.