European leaders tackled the thorny question of how to tax the financial sector on Thursday, deciding to introduce national bank levies but leaving global transactions tax plans for the G20 to consider.
AFP - European leaders tackled the thorny question of how to tax the financial sector on Thursday, deciding to introduce national bank levies but leaving global transactions tax plans for the G20 to consider.
At a summit in Brussels, the 27 EU heads of state and government agreed on the bank taxes that could fund future bailouts in the wake of Europe's debt crisis, though they were short on details.
In a bid to avoid competition distortions, they agreed that "member states should introduce systems of levies and taxes on financial institutions to ensure fair burden sharing and to set incentives to contain systemic risks."
The wording was changed from "levy" singular after Britain, which will announce a new national bank levy in an emergency budget on June 22, expressed concerns that monies raised in London could, further down the line, be used to prop up troubled eurozone banks.
Tax remains solely the preserve of national sovereignty, Britain insists.
"Such levies or taxes should be part of a credible resolution framework," the declaration added, inviting countries to shape the tax in similar terms and for the same purposes in their individual territories, so as not to encourage cross-border bank flight.
"Further work is urgently required on their main features," the leaders underlined.
EU president Herman Van Rompuy said, however, that leaders had decided not to back a joint call by France and Germany for a global tax on financial transactions, but to "promote" the option when G20 leaders gather for a summit in Toronto, Canada, next weekend.
The decision to throw the ball back at outspoken opponents including current G20 chair Canada as well big developing nations like Brazil and India was aimed at "maintaining a worldwide level playing field."
The global tax is supported by the International Monetary Fund, European powers and the United States but its opponents argue that they should not have to pay to clear up a mess they did not create.
"The introduction of a global financial transaction tax should be explored and developed further in that context," the declaration said.
According to a senior EU official, it is "in the pipeline, but I wouldn't be able to answer where exactly it is in the pipeline."
Put bluntly by one diplomat, London simply "doesn't want it," for fear of banishing its lucrative finance industry to Switzerland or other non-EU offshore centres.
The Group of 20 failed to find a consensus even on the less controversial bank levy proposals at a ministerial meeting in South Korea earlier this month.
Canadian Finance Minister Jim Flaherty said that the debate on the bank levy had been "a distraction from core issues" in Busan. Most G20 ministers "do not support the concept of a universal levy."
While French President Nicolas Sarkozy acknowledged that not all partners were "absolutely enthusiastic," Luxembourg Prime Minister Jean-Claude Juncker conceded: "I don't believe we'll get at the level of the G20."
France and Germany did receive support on Thursday from Italy, whose Foreign Minister Franco Frattini backed a bank tax "within a European framework" to avoid "everyone drawing up their own levels."
European Commission chief Jose Manuel Barroso also admits that such ideas face "enormous resistance" and would be "extremely difficult" to impose at a global level.
The commission published projections in April that said a tax on financial transactions in Europe could be worth 20 billion euros on an annual basis at current trading levels.
But it warned of a "substantial" threat of firms fleeing and of "asymmetric" revenues in different countries, namely in Britain where up to 80 percent of Europe's financial services sector is based.
Date created : 2010-06-17