Schaeuble Sees Financial Transaction Tax Riddled With Holes

  • ‘Even a Swiss cheese needs more than holes,’ Schaeuble says
  • 10 nations pursuing the tax met inconclusively in Brussels

German Finance Minister Wolfgang Schaeuble said a proposed European financial transaction tax is being hollowed out by increasing demands for carve-outs.

“The desire for exemptions is growing,” Schaeuble told reporters in Brussels on Tuesday after a meeting of officials from the 10 countries pursuing the tax. “Even a Swiss cheese needs more than holes. There has to be something in between them, otherwise it’s just a hole, not a Swiss cheese.”

Belgium has led calls to exclude pension funds from the tax. The country’s finance minister, Johan Van Overtveldt, reiterated after Tuesday’s inconclusive talks that “safeguarding of pension funds is one of the provisions of the coalition agreement of the Belgian federal government,” meaning he has little room to maneuver. More work will be done on the issue and ministers will reconvene next month, he said.

The European Commission 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 European Union 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.

Three Views

Spanish Economy Minister Luis de Guindos shared Schaeuble’s concerns about whittling down the tax. A raft of exemptions would only weaken the levy, though in pursuit of a compromise, options for pension funds and insurers are being explored, he told reporters.

Pierre Moscovici, the EU’s tax commissioner, said three positions were put forward on pension funds in the talks.

“Some believe that there cannot be any kind of exemption on this matter,” he said. “Others say there should be an exemption, but that would be a risk for the nature of the proposal itself. So there was a third option that emerged, which is basically proposed by France and is a kind of opt-out, with or without compensation, and we are now going to technically work on those three options.”

Imposing the tax could also undermine the efforts of Germany and France to lure international banks away from London as the U.K. leaves the EU. While Germany has consistently said it wants to reach a deal, the looming negotiations with the U.K. make it difficult, Schaeuble said.

“The environment for increased cooperation at this time, when we’re about to begin negotiating Brexit, the impact on London’s financial center and so on, isn’t an easy time,” he said. “For that reason I can’t make any reliable statement on the outcome” of the transaction-tax talks.

Another concern was the tax’s potential impact on the real economy, Moscovici said. After further technical work is done on the proposal, it will be time for the 10 countries to decide if the plan “is worthwhile or not,” he said.

The next round of talks “should be, if not the finish line, at least be quite a decisive one,” Moscovici said.

— With assistance by Esteban Duarte

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