Financial Transaction Tax: More money for future bank bailouts?

Press conference by Algirdas Šemeta, Member of the EC, on the Financial Transaction Tax, 14.2.2013. (EC Audiovisual Services)

Press conference by Algirdas Šemeta, Member of the EC, on the Financial Transaction Tax, 14.2.2013. (EC Audiovisual Services)

The European Commission announced today the details of the implementation of the Financial Transaction Tax (FTT), under the procedure of the enhanced cooperation. It must be noted that such a procedure may be launched at the request of at least nine EU member states. Incidentally, the eleven member states actually wishing to introduce a financial transaction tax through enhanced cooperation are Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia. Any other member state may join the enhanced cooperation, if they so wish.

Today’s Commission action comes after the decision of 22 January 2013 by the Ecofin council which regroups the 27 Financial ministers of the EU, to give the green light for this enhanced cooperation, leading to the introduction of an FTT. The European Parliament has already authorised the implementation of the tax, which is expected to be applied as from 1 January 2014.

The Commission announcement notes that, “As requested by the 11 Member States that will proceed with this tax, the proposed Directive mirrors the scope and objectives of the original FTT proposal put forward by the Commission in September 2011. The approach of taxing all transactions with an established link to the FTT-zone is maintained, as are the rates of 0.1% for shares and bonds and 0.01% for derivatives”.

In this way, the EU executive arm introduces the term “FFT-zone”, which describes the application area of the new tax. The FTT will not apply on day-to-day financial activities of citizens and businesses (e.g. loans, payments, insurance, deposits etc.). Nor will it apply to the traditional investment banking activities in the context of capital raising or to financial transactions carried out as part of restructuring operations.

Why a tax on financial transactions?

Algirdas Šemeta, Commissioner responsible for Taxation, said: “With today’s proposal, everything is in place to enable a common Financial Transaction Tax to become a reality in the EU. On the table is an unquestionably fair and technically sound tax, which will strengthen our Single Market and temper irresponsible trading. Eleven Member States called for this proposal, so that they can proceed with the FTT through enhanced cooperation. I now call on those same Member States to push ahead with ambition – to drive, decide and deliver on the world’s first regional FTT.”

Of the three objectives cited by the Commission, to be served by the FFT, the most important one is this: “the FTT will support regulatory measures in encouraging the financial sector to engage in more responsible activities, geared towards the real economy”. For one thing, with this observation the Commission recognises that the financial system does not function in a responsible way towards the real economy.

Unfortunately, it took five years for the Commission to accept that. After 2008, when the great credit crunch broke out and led to the gravest post war economic crisis, no serious measures have been introduced to stop the financial sector from being irresponsible towards the real economy. Banks are still free to go bankrupt and then ask for a government bailout, whenever their risky spinning of other people’s money turn sour. In short, the Commission and all the other regulatory authorities within and without the EU have let the banks free to continue pursuing their unholy practices. Let’s now examine what will happen with the new tax money.

Where the tax money goes?

According to predictions the revenues from the imposition of the FTT will amount to €31 billion yearly. It is important to analyse where all this money will go. Following the time cherished practice, tax collectors keep something for themselves. So the Commission proposes that a not yet defined part of that money “shall constitute an own resource for the EU Budget”.

What about the rest of it? According to the Commissions’ proposal the objective is, “to ensure that financial institutions make a fair and substantial contribution to covering the costs of the recent crisis, and to ensure even taxation of the sector vis-à-vis other sectors”.

If one takes this statement seriously, the financial institutions by paying this tax from their profits and not passing it on to their customers, they need at least 145 years to pay off the €4.5 trillion they have received from society as support. And this, without subtracting the part the EU budget will get out of the €31bn yearly.

Another drawback of this new tax is the possibility that the banks will certainly try to pass on part or whole of it to their customers, thus charging again the real economy. Then it is even more alarming  that the larger part of the proceeds may be used to formulate a fund, which will be used for future bank bailouts. If this is the case, taxpayers and the real economy as a whole, will be charged in advance for future imprudence of banks. In short, the Commission with this tax may be planning an additional tool of support to banks on the expenses of the real economy.

 

 

 

 

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Strengthen inclusion, participation of people with autism to ‘achieve their full potential’ says UN chief

Microsoft says the internet is getting a little nicer

EU food watchdog: more transparency, better risk prevention

More state aid to big firms, no special provisions for the SMEs

UN experts report: Business ‘dragging its feet’ on human rights worldwide

Global ageing is a challenge – and an opportunity

EFSF/ESM boss tells half truths about Troika’s doings

Nearly two-thirds of children lack access to welfare safety net, risking ‘vicious cycle of poverty’

New rules for temporary border controls within the Schengen area

How ducks are helping Bangladeshi farmers cope with cyclones

We must build resilience to face the future – but will we be fast enough?

Anti-vaccers: does the empty can rattle the most?

Eurogroup asked to reduce public debts of its member states

MEPs want robust EU cyber defence and closer ties with NATO

Harnessing the power of nature in the fight against climate change

World ‘not yet on track’ to ensure children a better future: UN rights chief

The sun’s impact on Earth and weather celebrated, as planet marks World Meteorological Day

Indonesian tsunami death toll climbs over 400 as Government-led relief efforts are stepped up

Better Regulation principles: at the heart of the EU’s decision-making process

UN investigates systematic sexual violence across South Sudan

Climate change is speeding up. Our response needs to be even faster

Horse meat runs faster than authorities…

Nigeria: Top UN officials say more support needed to ease humanitarian crisis and rebuild lives in conflict-ravaged north-east

Radioactive nuclear waste is a global threat. These scientists may have a new solution

Blockchain can change the face of renewable energy in Africa. Here’s how

The financial future of Eurozone on the agenda of Friday’s ECOFIN council

Why the 33,000 staff European Commission did not have a real contingency plan for the refugee crisis?

EU Commission spends billions without achieving targets

Youth for Climate Change

COP21 Breaking News_05 December: Ban Ki-Moon Closing Address at COP21 Action Day Innovation, Imagination, Faster Climate Action

Eurozone: New data show recession and debt closer to explosion

First Western Sahara talks at UN in six years, begin in Geneva

A Europe that Protects: Commission calls for continued action to eradicate trafficking in human beings

Presidents of pan-European youth organisations call upon the European Council to preserve the Schengen principles

Out with the old: Young People transforming Humanitarian Action

Security Council hails ‘historic and significant’ joint peace declaration by Ethiopia and Eritrea

Environment Committee MEPs push for cleaner trucks and electric buses

7 key challenges for the future of ASEAN – and how to solve them

WHO and IFMSA as transcendent pillars for world improvement

“A divided Europe is not in China’s interests”, Ambassador Zhang of the Chinese Mission to EU welcomes Brussels

“Leaked” TTIP document breaks post 8th negotiations round silence and opens door to critics

Britain’s May won the first round on the Brexit agreement with the EU

Commission makes it easier for citizens to access health data securely across borders

Tsipras bewildered with Berlin’s humiliating demands; ECB expects political sign to refinance the Greek banks

More than 750 million people around the world would migrate if they could

Fighting cybercrime – what happens to the law when the law cannot be enforced?

The inhumane face of crisis mirrored in numbers

Long live Eurozone’s bank supervisor down with the EU budget supremo

‘Critical test’ for North Korea’s Government as civilian suffering remains rife, warns UN rights expert

Following the World Cup? Then you’re watching high-performing migrants at work

How telehealth can get healthcare to more people

The secret weapon in the fight for sustainability? The humble barcode

Cyclone Idai: emergency getting ‘bigger by the hour’, warns UN food agency

European Youth Forum and youngest MEPs call on President Juncker to keep his promise to Europe’s youth

Falsified medicines: new rules to enhance patients’ safety

UK’s Cameron takes the field to speed up TTIP talks. Will “rocket boosters” work?

Trailing the US-EU economic confrontation

Logo Mania: A call to action to our crisis of connection

Banks, insurance giants are free again to abuse the real economy

Who will win the AI race? If countries work together, then the answer could be all of us

More Stings?

Comments

  1. M Swallow says:

    Of course the banks will pass any tax costs to their customers.!!
    The only way not to, is to use legislation to FORCE them to reduce the obscene levels of senior staff salaries/bonuses, and also to restrict dividends. Otherwise of course it just falls out of their capacious behinds on to the punters who pay them.
    In UK we recently had the Chairman of Bank of Scotland speaking to a parliamentary committee, claiming his chief exec was under-paid on around £2m pa, and almost wondered why he sticks around. These guys are given FAAAAAR too much sycophantic support by ignorant politicians instead of treating them the same way as your gas or water supplier – they do nothing clever for their money, they merely exploit ruthlessly a system of taking a lot of money off businesses very subtly.

    • M Swallow says:

      oops typo -Chairman of ROYAL Bank of Scotland i meant

      • M Swallow says:

        “RBS, 82-percent owned by the taxpayer, has faced criticism over a deferred bonus of 780,000 pounds ($1.2 million) that Hester is set to receive in March. But Hampton told lawmakers on Monday that Hester’s pay was modest by the industry’s standards.
        Hampton said Hester’s pay was well below the average in world banking. “Relative to other people doing these jobs his pay has been modest,” he told the Parliamentary Commission on Banking Standards.
        Hester, who receives a basic salary of 1.2 million pounds, chose to give up his bonus last year after a computer systems meltdown affected millions of customers. This year he was set to receive a share-based payment of 780,000 pounds deferred from three years ago.”

        superstars !

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s