Sven Giegold on Tobin tax success

Financial Transaction Tax: European Parliament defends the tax against the lobbyists

From Sven Giegold’s note ‘Mixed Feelings’ of 29 Jul 13

During the same week we voted on Parliament’s position for a European Financial Transaction Tax (FTT). The Economic and Finance Ministers of the EU had finally come to an agreement in January to introduce the FTT in an enhanced cooperation in 11 EU Member States. The proposal on the table foresees a tax of not less than 0.1% on transactions with stocks and bonds but also includes taxation of derivatives transactions of not less than 0.01%.
The financial lobby has made great efforts during the weeks prior to the votes to persuade MEPs to vote for various exceptions. Many opponents of the tax in the financial industry and in politics have changed their strategy in recent months.
Instead of opposing the tax directly, they demand exceptions. It sounds appealing to exclude e.g. pension funds from the Financial Transaction Tax. Then, however, fair competition between life insurance and many investment funds is not possible anymore. Allowing many exemptions would be the end of the tax. It is quite simple: either all are taxed or none. Only then tax collection is simple and inexpensive.

Fortunately, we managed to preserve the core of the proposal. The Parliament voted by a large majority for a tax that applies to a large number of financial products and market players. I have been fighting for the original proposal by Professor James Tobin for ten years now.
It is therefore a great success for me to see the European Parliament voting for taxing currency transactions. On this point European Parliament is going further in its position than the EU Commission.

To achieve a broad tax base in the original proposal pension funds and other mutual funds were not exempted from taxation. Many conservative and liberal Members of the European Parliament intended in first place to vote for an exemption for those instruments. With a compromise across political groups we luckily managed to avert this disastrous outcome. Unfortunately, this compromise came at a price. We had to agree to a couple of exemptions we consider to be useless and even harmful. In tax matters, the European Parliament is not involved as co- legislator but only has to produce an opinion. Our opinion on the Financial Transaction Tax is not binding for the Council. Although the Parliament managed to pave the way for the tax it is now the Council’s job to go down that road. The 11 Member States in the framework of enhanced cooperation bear the responsibility to agree on the broadest possible tax base and effective controls. It is crucial to keep up the pressure from civil society, to ensure that the industry lobby does not succeed in influencing those who have the final say on the binding rules.

I will continue to fight for fairer financial markets and better investor protection in Europe. In September I will be back with the latest stories from the European Parliament!

Follow Sven Giegold’s work in English at: http://www.sven-giegold.de/english/

See also: Teresa Pearce MP’s excellent critique of the UK government’s wrong-headed opposition to the EU Financial Transactions Tax in Left Foot Forward on 15 May 14.