Schaeuble Seeks Decision on EU Financial Transaction Tax in 2016

  • Agreement was reached on treatment of shares, derivatives
  • German finance minister says it ‘looks like’ positive decision

Progress on a planned European financial transaction tax at talks in Luxembourg could lead to a deal getting done by the end of the year, according to German Finance Minister Wolfgang Schaeuble.

“The countries that had reservations last time have withdrawn them, so some countries now want to take a look at the possible consequences of the text” that will be drawn up by the European Commission, Schaeuble told reporters on Tuesday. “We want to have a decision by year-end, a positive one, if possible.”

The compromise reached late Monday on the fringes of a meeting of euro-area finance ministers sets out the types of trades that would be covered. The principles are part of a proposal put forward by the Austria, which is leading the initiative.

The European Commission, the EU’s executive arm, first proposed the tax in 2011 to make sure the industry paid its fair share after the costs borne by taxpayers during the financial crisis. When the plan failed among all EU nations, a smaller group sought a compromise under “enhanced cooperation” rules, which require consensus from at least nine countries. Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain are still at the table.

‘Clear Agreement’

The 10-nation group agreed that the European Commission, the EU’s executive arm, will present draft legislation before the end of the year and further analysis will be done on the potential impact of the tax, including on pension funds, Austrian Finance Minister Hans Joerg Schelling said.

“It’s the first time we really have a clear agreement from all the countries on proposals that are precise," French Finance Minister Michel Sapin said. The work that’s been done “reassured the smaller countries, such as Slovenia and Slovakia,” he said.

Under the Austrian proposal, “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.”

The tax would cover “all derivatives,” 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.

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