Failure is not an option: It’s time to move ahead with an EU-wide FTT
As European citizens foot the bill for the financial crisis, Socialist members from the European Parliament argue that a refusal to move forward with an EU-wide Financial Transaction Tax (FTT) would be “irresponsible”.
“As government’s push through tough austerity measures, the EU must not shy away from its responsibility to its citizens, who are being forced to cover the cost of the financial crisis,” says Udo Bullmann, S&D economic affairs coordinator.
“The crisis has hit taxpayers hardest, not only through direct contributions to bolster the banks and prevent them from collapsing but also through rising unemployment, falling incomes, reduced access to social services and rising inequalities,” he adds. “Slashing spending in an attempt to reduce public deficits when a financial transaction tax could raise €200bn annually in Europe alone demonstrates blatant irresponsibility.”
S&D MEP Anni Podimata, the European Parliament’s draftsperson on innovative financing, adds that a broad based tax of 0.05 per cent on financial transactions would help finance budgets, reduce deficits and fight speculation. Without impacting on ordinary citizens, it would ensure financial gamblers help pay for the crisis they created.
“An FTT is capable of producing a double dividend. On the one hand, it would reduce the kind of harmful speculative derivatives trading which was a leading cause of the global financial crisis and, on the other, would generate substantial and much needed revenue for Europe and our partners around the world,” she says.
“This is not about taking ‘revenge’ against the financial sector – it’s about learning lessons and making sure such a crisis doesn’t happen again. Claims that a unilaterally introduced FTT would result in severe market distortions and a lack of competitiveness are nothing more than cock and bull stories.”
A Global call to action
On Thursday 17 February 2011, campaigners around the world are directing a targeted lobbying offensive towards UK, German and French embassies in over 20 countries in a concerted effort to push the FTT forward under the French presidency of the G20.
This clearly demonstrates that there is widespread support for an FTT at grassroots level, and if the G20 is unable to reach agreement on the issue the EU needs to take the initiative and act on its own.
Fighting for EU leadership
Calls for an EU level FTT were deleted from Podimata’s own initiative report by the European parliament’s economic affairs committee after a majority of conservative and liberal MEPs rejected the proposal. With 21 votes against and 21 in favour, the vote could not have been closer. But the S&D group will re-table the proposal when the report goes to plenary in March.
“Failure to find a solution to the problem at G20 level cannot be used as an excuse for the EU shirking its own responsibilities. While pushing for progress at a global level, the EU must show leadership and move ahead with an EU-wide tax on financial transactions,” says Bullmann. “It’s now or never for the FTT.”
The European commission is currently undertaking an impact assessment on innovative financing, and is expected to favour a Financial Activities Tax (FAT) over an FTT. However the two are not mutually exclusive.
“The FAT is unable to reduce speculation or generate the revenue an FTT is capable of. It’s not a case of ‘either’ ‘or’ – the two taxes don’t share the same characteristics and don’t serve the same purpose,” says Podimata. “The Commission cannot simply dismiss the FTT on grounds of practical obstacles as it has been shown that it is feasible to implement it at the EU-level.”
NOTES TO EDITORS:
On 10 March 2010, the European Parliament adopted a resolution on taxation of the financial sector, “Financial transaction taxes – making them work”. To read the resolution, please click here.
On 20 October 2010 the European parliament adopted a resolution on financial, economic and social crisis which called for the introduction of an EU-level FTT. The resolution, drafted by Pervenche Berès, was adopted by 501 votes to 67, with 50 abstentions. To read the resolution, please click here.
Although discussions over the precise scope of the FTT are ongoing, it is suggested that it should cover all spot and derivatives transactions traded on organised exchanges, for instance, trades of stocks and interest rate securities, trades of futures and options related to stocks, currencies, commodities and interest rate securities. It would also cover OTC derivatives transactions directly related to asset prices, in particular to exchange rates and interest rates, for instance, spot currency transactions as well as trades of foreign exchange derivatives and (single currency) interest rate derivatives.
Similarly, it is suggested that the adequate transactions exemptions and thresholds on amounts should be properly designed as to avoid the tax burden being transferred to consumers.