Brexit Kicks EU Financial Transaction Tax Into the Long Grass

  • Schelling says 10 nations want to know likely Brexit outcome
  • Talks will continue on pension impact, implementation costs

The 10 European Union countries still plotting a tax on financial transactions tied the proposal’s fate to the outcome of the Brexit negotiations, pushing any decision on the six-year-old plan even farther into the indefinite future.

Austrian Finance Minister Hans Joerg Schelling, who’s leading the tax talks, said a group of national experts, in collaboration with the European Commission, would “try to project the possible Brexit scenarios” on to the plan and “think about the consequences.” The uncertain outcome of the Brexit talks will complicate this effort, he said.

Hans Joerg Schelling

Photographer: Akos Stiller/Bloomberg

“We want to know from the commission which options are being negotiated and contemplated, and which one’s the most probable, in the view of the commission, so that we can include it in our assessment of the financial transaction tax,” Schelling told reporters on Saturday in Tallinn, Estonia. “It’s a difficult undertaking, because I’m not sure if the U.K. and the commission know which scenario is the most probable.”

The European Commission, the EU’s executive arm, proposed the tax in 2011 to make sure the industry made a “fair contribution” after taxpayers bore the costs of the financial crisis. When some member states opposed the levy, a smaller group sought a compromise under “enhanced cooperation” rules. Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain are still at the table.

German Election

Brexit concerns have dogged the proposed levy for months, with Germany and France dragging their feet as they prepare for a redrawing of the financial map that has already begun. A decision to impose the tax could benefit Ireland and Luxembourg, which are also courting U.K.-based banks and are not part of the group pursuing the tax.

Upcoming national elections have added to the uncertainty surrounding the transaction tax. Germans go the polls on Sept. 24, followed by Austria on Oct. 15. Both votes could bring a center-right government to power. So far, the Social Democratic coalition partners of ministers including Schaeuble and Schelling have pushed hardest for the tax.

Schelling said the 10 countries would continue work on two outstanding issues that have long defied efforts to find a compromise. 

“The first point is what impact does it have on countries that have a funded pension scheme rather than a pay-as-you-go system,” he said. “The second point is to once again calculate the result of our proposal and what it will cost to implement.”

In the meantime, Schelling said the commission would work on a legal text covering the aspects of the tax on which agreement has been reached.

— With assistance by Ott Ummelas, Rainer Buergin, Mark Deen, Radoslav Tomek, Carolynn Look, and Viktoria Dendrinou

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