Germany's Steinbrück Slams FTT Delays

by Ulrika Lomas, Tax-News.com, Brussels

15 August 2013

Germany's Social Democrat (SPD) Chancellor candidate Peer Steinbrück has vehemently criticized the black-yellow coalition Government for its failure to push through plans for a financial transactions tax (FTT) in Europe.

In an interview with Süddeutsche Zeitung, Steinbrück alluded to the delays in introducing the levy as a "scandal." The Government's "delay tactics" are simply preventing banks from contributing to the cost of the crisis and from paying for their mistakes, Steinbrück insisted. Speculators are getting richer, while money is seriously lacking in Europe to combat youth unemployment, he argued.

Germany's main Opposition parties, the SPD and the Green Party, voted in favor of the European Stability Mechanism (ESM) last year, in return for the swift introduction of a FTT in Europe, applied in as many European Union (EU) member states as possible. Germany and France have since spearheaded plans for the levy, within the framework of enhanced cooperation.

The European Commission set out its concrete plans for a European FTT back in February, advocating that a 0.1 percent rate of tax be imposed on shares and bond transactions and a 0.01 percent rate of tax be levied on derivative transactions. This would generate predicted annual revenues of between EUR30bn (USD39bn) and EUR35bn, of which approximately EUR10bn would flow to Germany.

This proposal has, however, been systematically picked apart from the outset, during protracted negotiations by participating member states. Leading experts have voiced their grave concerns regarding implementation of the levy, including president of the German Bundesbank, Jens Weidmann and former president of the European Central Bank Jean-Claude Trichet.

EU Tax Commissioner Algirdas Šemeta recently signaled that the Commission is prepared to consider suggestions for a lower rate, after Members of the European Parliament recommended a phased introduction plan. Furthermore, it is anticipated that money market or so-called "repo" transactions and government bonds will fall outside of the scope of the tax, thereby further drastically reducing the predicted annual yield.

Due to the ongoing delays, the German Government now expects that the FTT will not now enter into force before 2015, although most likely will apply in 2016.