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(Apr 12, 2012) On March 23, 2012, the European Commission released some data and information related to the Financial Transaction Tax (FTT), which was initially proposed through a directive issued on September 28, 2011. If the FTT is adopted, it will be levied on all transactions between financial institutions, provided that at least one party of the transaction is in the European Union. The FTT will also tax the exchange of shares and bonds at the rate of 0.1% and derivative contracts at a rate of 0.01%. (Press Release, European Commission, The Financial Transaction Tax Will Reduce Member States' GNI Contributions to the EU Budget by 50% (Mar. 23, 2012).)
On November 9, 2011, following the introduction of the FTT directive, the European Commission proposed a regulation to establish that the FTT will be a new own resource (that is, revenue that goes automatically to the European Union budget, without the need for any subsequent decision by national authorities), to be added to the future EU budgets. (Council Regulation on the Methods and Procedure for Making Available the Own Resource Based on the Financial Transaction Tax, COM (2011) 738 final (Nov. 9, 2011) EUROPA.)
Currently, the EU budget has three kinds of own resources:
a) those that accrue from customs duties from imports from third countries and sugar levies. EU Members retain 25% of this amount to defray the costs of collecting these duties;
b) those that accrue from value-added tax (VAT); and
c) those based on gross national income (GNI). A standard percentage is imposed on the GNI of each country. (Press Release, supra.)
The Commission recommends that two-thirds of the revenues accrued from the FTT go to the EU budget and the remaining one-third be retained by the EU Members. The Commission estimates that the contributions of the Member States to the EU budget will be reduced by a total of €54 billion (about US70.77 billion) by 2020. The specific amounts by which each EU Member's GNI-based contributions to the general budget will be reduced range from about €27 million for Malta to €67 million for Estonia, €80 million for Cyprus, €645 million for Portugal, €834 million for Finland, €1.67 billion for Sweden, €8.77 billion for France, and €10.75 billion for Germany. (Id.)
In the Commission's view, the ultimate beneficiaries will be the Member States, either through direct revenue collection or through a reduction of their contributions to the EU budget. (Id.) It is unclear whether the FTT proposal, as it stands now, will be endorsed by the EU Members. The figures on the savings presented by the Commission were intended to convince the EU states, especially United Kingdom and Germany, that have been critical about the FTT since it was proposed. Jose Manuel Barroso, the President of the Commission, expressed his optimism about the fate of the proposal by stating that "some who have been skeptical will probably change their position," once they realize the savings. However, this claim did not convince the United Kingdom, which responded that it "completely refute(s) the suggestion" that it would benefit from an EU transactions tax. (Honor Mahony, "Robin Hood" Tax Would Save EU Countries Billions, EUOBSERVER.COM (Mar, 22, 2012).)
The Commission is of the opinion that the endorsement of an FTT at the EU level might be the first step towards eventual adoption of a FTT globally. (Id.)
- Author: Theresa Papademetriou More by this author
- Topic: Taxation More on this topic
- Jurisdiction: European Union More about this jurisdiction
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Last updated: 04/12/2012