02 July 2013

Reuters: EU's Šemeta says willing to scale down transactions tax

Europe could scale down a proposed tax on financial transactions, said Commissioner Šemeta, the EU's commissioner in charge of tax policy, signalling for the first time readiness to soften a scheme which some fear could backfire.

Speaking to lawmakers in the European Parliament, Algirdas Šemeta said he would prefer to lower the tax rate for trading in instruments such as government bonds rather than exempting them from the levy. Šemeta's remarks, which he hopes will inject fresh momentum into flagging talks among a group of states seeking to pioneer the tax, could mark a radical change of tack for a scheme that has divided opinion across the European Union. "The Commission is ready to examine the suggestions made for an initial introduction of the tax with lower rates for products of specific market segments", Šemeta said in a speech, adding that the rate could later rise. "Both government bonds and pension funds should remain in the scope of the Directive. For those two categories of products, however, a reduced rate could constitute a suitable way forward and should be further examined."

The countries supporting the tax, which include Italy, Spain, Austria, Portugal, Belgium, Estonia, Greece, Slovakia and Slovenia, have agreed to press ahead with the levy, having failed to persuade all 27 EU Member States to sign up. Some cash-strapped countries have already begun counting on the new income, a potential windfall. But in a world where billions of euros can be moved at a keystroke, even some of the tax's backers are having doubts.

Italy and France have expressed concerns about widening the tax beyond shares to government debt as both believe it could discourage investors from buying their bonds.

Banks have lobbied furiously against the tax. It has also hit legal challenges from Britain, which will not join the tax but fears being forced to collect it on behalf of other EU states, driving business from London's financial centre.

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© Reuters