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Analysis of the European Commission proposal for 
an EU-wide Financial Transaction Tax 
The European Commission put forward an EU FTT 
in its EU 2014-2020 budget proposal on 29 June 2011 
A milestone in FTT advocacy 
Over a decade of advocacy for a global Financial Transactions Tax (FTT) and widespread campaigning especially over the last two years seems to be finally bearing fruit. The European Commission finally proposed the implementation of an EU-wide Financial Transactions Tax (FTT), late in the evening of 29 June 2011. It proposed a FTT as one channel by which the EU could raise its ‘own resources’ to fund the EU budget. The second channel being proposed is a new EU Value Added Tax. Presently the European budget is essentially funded by its member states.

The main features of the FTT proposal are

 

 

 

(based on the information available so far)

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The EU FTT is to be introduced by 1 January 2018 at the latest

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The EU FTT is expected to bring 37 billion euros (no information available yet how this figure is arrived at) into the EU budget.

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The ‘maximum tax rate’ for the FTT is to be set when a legislative proposal is tabled in the autumn of 2011.

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The proposal favours a centralized collection system. That is, while the proposal acknowledges the existence of various kinds of FTTs in different member states, it argues that it is in the interest of EU’s internal market and efficiency to set up an EU-wide FTT with a centralized collection system.

Next steps

In implementing an EU-wide FTT as a channel to raise ‘own resources’ part of EU budget 2014-2020

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A legislative proposal around the FTT will be tabled by the European Commission in the European Council and European Parliament by autumn 2011

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A unanimous decision will have to be taken on the final form of the current European Commission proposal on the 2014-2020 EU budget by the Council after consulting the European Parliament. In order to enter into force, this decision will have to be ratified by all Member States.

In implementing an FTT as such

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The European Commission is expected to publish an impact assessment of the FTT and FAT by mid-July 2011

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The European Council is expected to decide on a position on taxing the financial sector (including the FTT) ahead of the G20 in France in November 2011.

What does this mean?

The very fact that the European Commission has clearly proposed the implementation of an EU FTT is in principle a great achievement

 

. Official documents (most notably its Communications in August and October 2010) touching on the FTT did already in the past acknowledge the feasibility of the FTT but stated a clear preference for the IMF’s alternative proposal- the Financial Activities Tax (FAT). Thanks to consistent pressure from civil society and the European Parliament, in October 2010 the Commission went a step further and indicated that it promoted a global FTT to fund ‘global challenges’ and would take this message to the Seoul G20, November 2010. It stuck to this position even after the European Parliament almost unanimously passed a resolution in March 2011 calling for the adoption of an EU FTT. Yesterday’s announcement that the Commission proposes a EU-wide FTT therefore marks a dramatic change in the European Commission’s position on the FTT.

The battle has only just begun…

 

while the inclusion of the FTT as a channel to raise ‘own resources’ indicates that the Commission finally supports a FTT, there is no guarantee that FTT revenue will be used to finance development and tackling climate change.

The proposal only speaks of the value of the FTT in helping countries plug the holes in their national coffers caused by the financial crisis. It does not say anything of the FTT being used for funding ‘global challenges’ as it stated in its October 2010 communication.

• the proposal states that the FTT should be implemented by 2018 at the latest. While there is an understandable time-lapse between the tabling of the proposal and its actual implementation, 7 years seems unreasonably long (though the date could be just be read as a very careful estimate of how long it takes decisions to be implemented in the EU).

• there is no guarantee that the next European Commission under new leadership would be equally committed to implement a FTT.

 

 

The revenues that the FTT will generate are needed urgently now

to finance the still-empty UN Green Climate Fund, not to forget the resources that will be needed if the MDGs are to be achieved by 2015.

Finally, while the very inclusion of a

 

 

FTT as a channel for the next EU budget is an achievement in itself, it is only a first step

:

• Member States (particularly the UK, Sweden and the Netherlands) will have to be convinced of the desirability of an EU-wide FTT.

• the EU-FTT will need to be designed and implemented carefully to safeguard the FTT’s various potentials (contributing to reduce instability in financial markets by reducing short-term highly leveraged speculation; and generating significant volumes of resources) and in order to serve as a pilot to show other parts of the world that a FTT is a good instrument.

• the struggle will continue to reach a global FTT.

Additional resources

 

 

CIDSE-Oxfam media reaction, 29 June 2011:

CIDSE and Oxfam welcome EU FTT plan but money must go to tackle poverty

 

CIDSE Recommendations June 2011: FTT for people and the planet: Financing climate justice in EN - FR - IT - PT -

ES

• CIDSE Position Paper November 2009: International taxes on financial transactions: Responding to global challenges towards a fairer sharing of costs EN - ES

 

CIDSE

 

is an international alliance of Catholic development agencies. Its members share a common strategy in their efforts to eradicate poverty and establish global justice. CIDSE’s advocacy work covers global governance; resources for development; climate justice; food, agriculture & sustainable trade; and business & human rights www.cidse.org

Document contact:

 

 

Jean Saldanha, saldanha(at)cidse.org, +32 2 233 37 53

30 June 2011

 

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