ECON Committee: Commissioner Šemeta presents key options for innovative financing in the EU
10 January 2011
Taxation Commissioner Šemeta said that the Financial Activities Tax appears to be a promising option within the EU. It could ensure that the financial sector is taxed fairly and generates much-needed revenues.
On Financial sector taxation, the Commission's objectives are the following:
· First, to ensure that the financial sector is making a fair and substantial contribution to public finances;
· Second, to complement financial sector regulation in correcting undesirable behaviour for society in this area, without undermining EU competitiveness; and
· Third, to avoid a patchwork of divergent national financial sector taxes which could create new obstacles to the Single Market.
Regarding the risk to the competitiveness of EU financial institutions, the Commission will need to analyse the potential impact of FAT to ensure that the benefits of any tax we may introduce outweigh the costs. Preliminary findings show that the risk for competitiveness would be lower with EU FAT than with an EU FTT as banking activities are harder to relocate than (electronic) transactions.
At global level, the Commission supports further exploration and development of a Financial Transaction Tax. It will work with the French Presidency of the G20 in order to promote an agreement with the most relevant international partners. "I personally raised the issue with the US treasury in Washington in December, and found a readiness amongst my US counterparts to discuss further once they have seen the results of our forthcoming Impact Assessment," said Šemeta.
Given the potentially high revenues that FTT could generate, it appears to be an attractive funding solution at global level. If applied globally and at a rate of 0.1%, tax revenues are predicted to be around EUR 60 billion. Estimates of even ten times this amount are cited by some studies if derivatives are included, although the Commission considers these latter figures to be highly uncertain.
By the summer 2011, the Commission services will prepare an Impact Assessment and scrutinise the cumulative impact on financial institutions of new regulation, bank levy and taxes.
Where are we today with the Impact Assessment?
The Commission launched studies on the current taxation of the financial sector and on a review of empirical studies. These results should serve as a basis for the evaluation of potential market reactions to taxation and the risk of relocation.
Work with different external institutions like the Bank for International Settlement, the European Central Bank, Financial Market Regulators and external academics, has been launched. It will contribute to data collection and will give further insights on available modelling approaches.
Internally, work on potential models to evaluate the influence of financial sector taxes on capital costs, growth and risk taking are ongoing. To better assess the cumulative aspects, different Commission Services work closely together.
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