European banks concerned that Commission proposals on taxation are inappropriate
11 October 2010
The EBF is concerned over the multiplication of measures that place increasing burdens on the financial sector. Proposals continue to flourish, despite the absence of a comprehensive impact assessment and show very little concern for the international competitiveness of Europe’s banks.
“The Commission proposals for a Financial Transaction Tax and a Financial Activities Tax are the latest additions to an increasingly long list of financial measures that are taken without apparent coordination”, declared Guido Ravoet, Secretary General of the European Banking Federation.
Regarding a possible Financial Activities Tax, the EBF is extremely worried that the Commission’s proposals are based on a fundamental misconception: “The existing VAT-exemption for the banking industry is not a tax concession to the sector. On the contrary, stressed Ravoet, banks cannot deduct VAT charges, which puts them at a disadvantage compared to non-financial businesses where VAT on inputs is recoverable and thus cost-neutral.”
Moreover, the EBF highlights that banks in Europe contribute 20% to overall corporate tax, whereas their activity represents only 3% of GDP. “Banks are clearly not under-taxed. This makes them higher contributors to budgets than other industrial sectors”, explained Ravoet. Additionally, the proposed taxing scheme would be economically ineffective, since it would not distinguish between banks which performed well during the crisis, and did not need public support, and those which did.
The Commission’s latest proposals are made in an already restrictive context:
Demanding capital and liquidity requirements have been agreed at international level, which may hamper banks’ lending capacity.
Furthermore, Europe has already proposed
- the creation of a resolution fund financed ex ante;
- doubling the level of deposit guarantee schemes;
- the creation of a pre-funded investor compensation scheme; and
- permanent or temporary remuneration taxes.
At the same time, significant components of the reform package on capital regarding additional buffers remain undetermined.
Moreover, individual Member States are also imposing unilateral taxes and levies on banks, without any apparent coordination with other Member States. “Clearly, it is time for policymakers to take stock of the complete picture and determine their priorities” stated Ravoet. Coordination of measures is crucial. Any financial transaction tax would have to be imposed at international level, where for the time being consensus still seems elusive."
“We welcome a discussion about how the financial sector can properly contribute to healthy public finances, argued Ravoet. But the terms of this discussion would have to be clear and fair.”
© EBF
