No progress on the design of the European Financial Transaction Tax (FTT) is expected from the meeting of the EU Finance Ministers in Brussels. However, it seem a turning point is near since the chances of introducing such a tax are running out. If the ten member states which support the initiative don’t reach an agreement before the end of the year, the so-called “Robin Hood tax” could disappear. But if the only possible agreement is the watered-down tax proposed by France, Italy and Spain, the instrument would be “useless”, many organizations argue. Germany is the greatest defender of a more ambitious tax.

For the supporters of the European Financial Transaction Tax (FTT), better known as Robin Hood tax, the only acceptable option is that the EU members states agree to support the FTT defended by the European Commission and the European Parliament since 2011: a tax of 0.1 percent on stocks and bonds and 0.01 percent on derivatives to control speculative financial flows and raise funds to fight the financial crisis.

Where are we now?

Only ten EU member states support the original initiative, which was supposed to come into force in January 2014. The compromise was to reach an agreement on the final design of the tax before the end of this year.

However, now some of the original proponents of the tax are watering down the proposal. France, Italy and Spain want to tax only shares and just 3 percent of the derivatives, the most speculative financial products.

But defenders of the FTT do not accept the proposal France is leading. For Green member of European Parliament (MEP) Sven Gielgold that proposal is a “dirty compromise”.

“A dirty compromise means the French idea, the Italian idea, one has to say, of a minimum tax which only brings 3 billion euros a year, which means almost nothing. For this we don’t need a Financial Transaction Tax. This is not a Financial Transaction Tax”, he said.

And he also added: “The alternative is a political blockage. All this is a shame for the council because the original plans of the European Commission were supposed to bring 70 billion euros a year, and this is what we really need.”

On the same line Vanessa Lopez, director of the NGO ‘Right to Health’, one of the members of the ‘European Robin Hood Coalition‘, stressed that if the original FTT doesn’t win the battle, then in the end all these efforts and discussions would have been for nothing. (audio in Spanish)

“We would have a FTT which is useless, which is not useful, neither to regulate the financial system, neither to disincentive the highly speculative products, neither to raise money”.

She even believes that “some small countries could leave the agreement because it would be more expensive to put in place the tax than the money they could collect”.

For Javier Pereira, policy officer of Intermon Oxfam International, the French option is also “the worst option”.

For him, “the discussion is whether they want to have something no matter at what cost, not matter at what level of ambition, or if they were serious about their commitments and they are willing to procedure and solve that in a good broad-based FTT”.

According to Intermon Oxfam, the FTT proposed by France would raise only 4 billion euros a year, compared to the 34 billion euros a year the original FTT proposal could collect.

Why a FTT?

Defenders argue that the financial sector is less taxed for its activity and that it should be taxed more to repay the costs of public bailouts and the ongoing costs of the recession it caused. But the goal is not only to raise public money, the FTT would be useful to disincentive the highly speculative products and regulating the financial system, too.

Contrary to what critics of the FTT argue, many economists, as Professor Avinash Persaud, a former JP Morgan executive, consider that “it is hard to conclude the tax will have more than a marginal impact on costs for long-term investors, like corporates and pension funds.”

On the same line, Giegold reckons that the FTT would not punish long-term investors, but would only punish the most speculative operations, the ones destabilizing economies.

“The ones who speculate short-term, with large amounts of money, investing in and out in different financial products, they are hit by the tax”, Giegold said. “The ones who invest long-term, they basically pay nothing”, he added.

How would the money be used?

The money raised from the tax would be managed by the member states and could be used to fund public goods such as health and education, combat climate change and reduce the effects of the crisis on the most vulnerable groups. But the specific destinations of the taxes collected is part of a second stage of discussions.

According to the European Commission, the new levy could raise around 34 billion euros in those 11 countries that initially signed the compromise. Slovenia has recently left the agreement.

It is estimated that the FTT would gather up to 56 billion euros if all 28 EU countries were to agree – an unlikely scenario.

What if an agreement is not reached?

If an agreement is not reached before the end of year, when the Italian Presidency of the Council comes to its end, the introduction of a FTT will probably have even more difficulties to see a green light. The next presidencies of the EU go to Latvia and Luxembourg, countries which don’t support the FTT.

Author: Ahinara Bascuñana López, Euranet Plus News Agency

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Official web page of the international movement for a Robin Hood tax

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