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

Advertising

the European Sting Milestones

Featured Stings

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

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

Under fire, UN refugee agency evacuates 135 detained in Libya to Niger

EP Group leaders on Brexit: “the agreement is not open to renegotiation”

Chart of the day: This is what violence does to a nation’s GDP

“Beating pollution for our planet”, a Sting Exclusive by Mr Erik Solheim, the Executive Director of the United Nations Environment

Give a chance to the brothers of Ailan: reception of refugees in Greece

Changing world of work needs new jobs strategy

The challenges of the universalization of the health system in Brazil. What can we change?

European Banking Union: no one is perfect

What the next 20 years will mean for jobs – and how to prepare

Outgoing UN official praises Iraq’s ‘exemplary peaceful transfer of power’ at the top

OECD welcomes French plans to increase and better target foreign aid

What brands get wrong about China – and how to put it right

Scientists have created a new kind of plastic that could be infinitely recyclable

I have a rare disease. This is my hope for the future of medicine

Greece: The new government of Alexis Tsipras shows its colors

They won this year’s Nobel for economics. Here’s why their work matters

We need to deep clean the oceans. Here’s how to pay for it

Multiculturalism, social diversity and tolerance

Youth not prioritised in new Commission

GSMA Mobile 360 Series – Europe – 14 June 2016

Technology is delivering better access to financial services. Here’s how

European Parliament the most trusted EU institution

Lack of investment and ambition means Youth Guarantee not reaching potential

World Health Organisation and young doctors: is there any place for improvement?

Here are six bold ideas to accelerate sustainable energy innovation

Deepening Europe’s Economic and Monetary Union: Commission takes stock of progress

Future of Insurance Claims in Focus at Fourth Annual Connected Claims Europe Summit

WhatsApp to face scrutiny from EU regulators task force over data sharing with Facebook

This new way of understanding disease is changing medicine

Malta and Slovakia: MEPs warn of lack of judicial independence and corruption

G20 LIVE: Fact Sheet from the G20 Leaders Summit and key outcomes (G20 Antalya 2015 Summary)

Civilians ‘continue to pay highest price’ in Ukraine conflict, with peace prospects losing ‘momentum’

Why AI will make healthcare personal

Independent UN rights expert calls for compassion, not sanctions on Venezuela

“We are in Europe, but not of it”, from Churchill to Cameron: British Exceptionalism now threatens the entire EU Edifice

Bangladesh elections: Hold those responsible accountable for ‘violent attacks and intimidation’

UN human rights chief denounces grave ‘assaults’ on fundamental rights of Palestinian people

The untold story of who caused and who pays for the economic crisis

How painful is the Greek tragedy for the Germans?

Monday’s Daily Brief: WFP mulls ‘last resort’ Yemen aid suspension, top peacekeeping awardee announced, abuzz over Bee Day, Ebola threat ‘very high’

Trust links up supply chains. How do you establish it in the digital era?

Wind farms now provide 14% of EU power – these countries are leading the way

Erasmus+: an expected budget of €3 billion to be invested in young Europeans and to help create European Universities in 2019

ICC Appeals Chamber acquits former Congolese Vice President Bemba from war crimes charges

Macron in St. Petersburg didn’t oppose Trump on Iran, in Putin’s presence

‘More time’ agreed for buffer zone, to spare three million Syrian civilians in Idlib

Antitrust: Commission fines Google €1.49 billion for abusive practices in online advertising

We can’t tell if we’re closing the digital divide without more data

Nordic noir: The unhappiness epidemic affecting young people in the world’s happiest countries

Youth Parliament to finalise millennials´ priorities for future of the EU

Thousands risk lives fleeing fighting in Syria’s last ISIL stronghold

Will the three major parties retain control of the new EU Parliament?

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

JADE Spring Meeting 2017 – day 3: JADE Academy trainings, networking session and gala dinner – Excellence Awards winners revealed

Mobile young people create the European labour market of tomorrow

An FTA between EU-US to hurt South Korea

Commission launches debate on more efficient decision-making in EU social policy

Why business can no longer turn a blind eye to poor vision

ECB offers plenty and cheap liquidity to support growth in all Eurozone countries

We need to bin disposable items for good. Here are 5 ways to do it

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