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

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

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

COP24: Paris agreement remained alive but fragile while the EU attempts to slow down CO2 emissions for new cars

The secret to Bangladesh’s economic success? The Sheikh Hasina factor

Me and China

Argentina’s agro-food sector is growing remarkably, but agriculture policies are not keeping pace

Invisibility outside the closet: health as a right for all

Myanmar companies bankroll ‘brutal operations’ of military, independent UN experts claim in new report

Deadly violence at Israel-Gaza border escalates dangerously: UN chief condemns in strongest terms

Companies ‘failing’ to address offline harm incited by online hate: UN expert

China Unlimited: an exclusive interview with the former Ambassador of Hungary to China

Amidst ‘high political tension’, UN chief appeals to G20 leaders for stronger commitment to climate action, economic cooperation

Ecuador: UN ‘stands ready’ to support talks, in bid to end political turmoil

Measles cases nearly doubled in a year, UN health agency projects

Deeper reforms in Korea will ensure more inclusive and sustainable growth

Environmental Implementation Review: Commission helps Member States to better apply EU environment rules to protect citizens and enhance their quality of life

ITU Telecom World 2017 on 25-28 September in Busan, Republic of Korea

GSMA Announces First Keynote Speakers for 2019 “MWC Los Angeles, in Partnership with CTIA”

China hopes EU Commissioner De Gucht drops super anti-dumping tariff on solar panels

The European Sting at the Retail Forum for Sustainability live from Barcelona

Italy’s revised budget remains roughly unchanged waiting for Europe’s fury

Sudan: ‘Violence must stop’, says UNICEF chief, ‘gravely concerned’ over 19 child deaths since military backlash

The shrinking Arctic ice protects us all. It’s time to act

More capital and liquidity for the banks

MWC 2016 LIVE: Intel focuses on 5G “beyond the Powerpoint”

The UN came of age with the nuclear bomb. Time for it to step up to the AI era

Mergers: Commission prohibits Siemens’ proposed acquisition of Alstom

Immigrants make good entrepreneurs. This study proves it

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

12 ways the tech sector can help save the climate in 12 years

The European Parliament hemicycle in Strasbourg (Copyright: European Union, 2017 / Source: EC - Audiovisual Service / Photo: Mauro Bottaro)

EU Parliament sends controversial copyright law reform back to discussion

Poor Greeks, Irish and Spaniards still pay for the faults of German and French banks

How a bionic arm is helping one little girl enjoy the things most take for granted

Trade Committee advocates lower tariffs in Western Sahara

Collective action now, the only way to meet global challenges, Guterres reaffirms in annual report

UN Environment Assembly 2017: where the world convenes to #BeatPollution

EU cracks under the weight of its policy on the Ukraine-Russia nub

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

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

EU-wide penalties for money laundering: deal with Council

A Monday to watch the final act of a Greek tragedy; will there be catharsis or more fear?

Is Eurozone heading towards a long stagnation?

Promoting gender equality a ‘crucial contribution’ in effort to restore, protect our planet’s oceans

The Tears of lovely Memories

Bundesbank’s President Weidmann criticises France and the EU. Credibility at risk?

In Finland, speeding tickets are linked to your income

Globalization 4.0 must provide for the poorest, or it risks causing chaos for everyone

FROM THE FIELD: Green shoots of peace in South Sudan

Big data is coming to agriculture. Farmers must set its course

Bridging the gap: Health through technology

The Ecofin Council creates officially the clan of ‘undead’ banks

ECB readies itself for extraordinary monetary measures defying Germany

Health spending set to outpace GDP growth to 2030

Employment and Social Developments in Europe: 2018 review confirms positive trends but highlights challenges, in particular linked to automation and digitalisation

UN humanitarian coordinator condemns Central African Republic hospital attack as ‘inhuman and unworthy’

“Working together to make a change at the COP 21 in Paris”, an article by Ambassador Yang of the Chinese Mission to EU

Microplastic and nanoplastic pollution threatens our enviroment. How should we respond?

MEPs strengthen EU financial watchdogs

Horse meat runs faster than authorities…

Robots aren’t stealing all our jobs, says the World Bank’s chief economist

Polluted lungs: health in the center of environment discussion

Brexit: No withdrawal agreement without a “backstop” for the Northern Ireland/Ireland border

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 !

Leave a Reply to M Swallow Cancel reply

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