EU Lawmaker Makes A Stand Over FTT

Terry Flanagan

One senior European lawmaker has backed calls from the financial services sector to scrap the controversial financial transaction tax and dismissed the parliament vote on the levy yesterday as a “huge waste of time”.

“People keep telling me the financial transaction tax will curb speculation and it’s apparently going to make the banks pay for their mistakes of 2008,” Kay Swinburne, a UK center-right MEP, who is also a member of the influential Economics and Monetary Affairs Committee at the European parliament, told Markets Media.

“I honestly don’t think the banks will pay anything towards this—their customers will pay all of it whether it be European savers or European corporations trying to hedge their business risk. It’s going to be the consumers at the end of the day who will pay this tax like they do with any other tax. I think it’s misguided. If you want to change behavior amongst the banks then the UK’s banking levy would be a far better model that they could use.

“Of course, no member state at the moment is prevented from taxing financial transactions in their jurisdictions. If they want, they could do what the UK does and apply their own tax but there is no need whatsoever for having a European FTT.”

Swinburne, also a member of the Conservative party in the UK and its spokesperson on economic and monetary affairs, pointed out that the European parliament does not have a formal role on anything that involves taxation.

“We are consulted but we have no co-decision on this one,” said Swinburne. “So it really is the Council of Ministers that will decide this, not the parliament. So this is a political message and it won’t have any weight in anything else. We shouldn’t get too excited about it; we have just wasted a huge amount of parliamentary time debating and voting on something when actually all we have is a consultation role.”

The parliament yesterday voted overwhelmingly, by 487 to 152, to back the European Commission’s legislative proposals for a FTT that set a 0.1% tax on all share and bond transactions and a 0.01% levy on derivatives trades, but the parliament added in its report on FTT that pension funds should be the only sector exempt from the levy. The report also wants the tax better designed to catch more traders and make evasion unprofitable—and that it wants to push ahead with the proposals even if only some member states adopt it. The UK, Netherlands, Sweden, the Czech Republic, Ireland, Malta and Luxembourg are all against a financial transaction tax.

The European parliament is keen to force the plans for an FTT on to the statute books and hopes other jurisdictions around the world will follow suit.

“It is dangerous for Europe to think that setting high regulatory standards in the European Union simply means other jurisdictions will do the same,” said Maltese MEP David Casa in the debate in Strasbourg yesterday.

“The extremely high mobility of financial transactions makes the possibility that banks would move a number of their transactions to financial markets which do not apply the tax real and, to an extent, inevitable.”

However, the EU’s top financial services regulator, Michel Barnier, was in triumphant mood yesterday after the parliament vote.

“European parliament vote financial transaction tax; a step towards more fairness in our societies,” he posted on his Twitter account.

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