UPDATE 1-Germany open to bourse levy, prefers broader tax

Fri Jan 20, 2012 8:45am EST

* Germany would consider bourse tax or stamp duty

* UK would back only global financial transaction tax

* Stamp duty taxes only shares, falls on investor

* FTT taxes shares, bonds, derivatives, paid by banks

By Alexandra Hudson

BERLIN, Jan 20 (Reuters) - Germany favours an EU-wide tax on financial transactions but would consider a narrower bourse levy as a compromise if it secured the support of Britain, the government's spokesman said on Friday.

German Economy Minister Philipp Roesler had earlier raised the possibility of a bourse tax or stamp duty as an alternative to a proposed financial transaction tax, which Britain opposes for fear it could make London less attractive for business against other global financial centres.

Britain already operates a stamp duty of 0.5 percent on trading shares, a levy which the investor pays.

Under the European Commission's proposed financial transaction tax, bonds, derivatives and shares would all be taxed, with the banks that handle the transaction having to pay rather than the investor. For a factbox on how it could work click on

The moves are all broadly part of the drive since the financial turmoil of 2008 to make Europe's banking sector pay more back to the rest of society in recognition of how governments have had to carry the can for its losses.

German Chancellor Angela Merkel has said Germany wants a financial transaction tax introduced across the European Union, but has indicated her Christian Democrats (CDU) would accept the tax also within the 17-member euro zone if Britain rejected it.

That has put her at odds with Roesler's Free Democrat Liberals (FDP), her junior coalition partners, who will only accept the tax across the EU.

Asked to clarify Berlin's stance, government spokesman Steffen Seibert said at a regular press conference on Friday there was no change.

"The government welcomes the EU Commission's proposal because it encompasses our requests for a broad based tax with a low rate. We will fight for this."

However, he added Roesler's suggestion was "sensible".

"BRIDGE" TO UK

"He is looking at all possibilities for getting the United Kingdom on board... We need to find out in talks whether a bourse tax could be a bridge for the United Kingdom, then Germany will discuss this with its European partners."

European leaders have said they plan to map out a financial transaction tax by March. Finance Ministry spokesman Martin Kotthaus said discussions on this were continuing.

"We would like to have settled by the end of the first quarter if this is a proposal which flies... If not then we have to look at what other ways are possible."

France has also previously said it would campaign for a financial transaction tax within the euro zone. Spokesman Seibert declined to comment on whether the French were also considering alternatives.

Asked what its stance might be on an EU-wide stamp duty proposal, a spokesman for Britain's Treasury said none had been formally tabled but that London continued to engage with other members on the matter.

A senior Bundesbank member on Friday urged governments to reach agreement on the issue as soon as possible in order to provide clarity to markets.

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Comments (2)
FTT seems to be crumbling before our eyes. How can just a few countries pass it on their own, as that is against the spirit of an EU-wide, or at least euro zone-wide initiative? It’s supposed to be a minimum of 9 or more countries in the EU that passes a new tax policy initiative, and FTT may have less than 9 EU or euro zone countries in support.  

Let’s not lose sight of the role that FTT was destined to play in the bigger-picture events of the EU and their bailouts. FTT was chosen as the first EU tax initiative in support of the new EU fiscal compact. The UK objected to the fiscal compact over the FTT proposal and more, putting the EU-fiscal-union drive into neutral and disarray.

The EU leaders including Merkel and Sarkozy want to go back into drive and they need a coordinated new EU-wide tax agreed-to, along with the UK signing a new fiscal compact. Sarkozy probably needs this fast, before his re-election in May.

So, these leaders appear to be floating a trial balloon to downsize their FTT into a UK-style stamp duty tax.  Will that be enough to get the UK to sign the fiscal compact, which is France and Germany’s main goal? Then they can claim victory on a new EU-wide tax on transactions and a successfully-agreed to EU-wide fiscal compact. Back on their way and with growing influence in Brussels. 

But, stamp duty is terrible for traders and investors who will be snagged with it in most cases. The UK should repeal their stamp duty tax, as they recently considered, and continue their no vote on the EU fiscal compact. There we other issues of financial-market sovereignty too, like EU-wide Brussels-centric regulations that the UK objected to. Plus, Sweden probably won’t want a stamp duty tax either.  All those that said, they would go along if it’s EU-wide may be called on their bluff now and that’s not good. Unless, FTT or stamp duty is G-20-wide, finance will move to America, Switzerland and Asia.

Stamp duty is a Trojan-Horse for FTT, and a bad idea on its own anyway. There are many holes in the stamp duty tax in the UK. See this report on why the UK should repeal stamp duty http://www.oxera.com/cmsDocuments/StampDutyMay2007complete.pdf

FTT was a horrible tax, but a real long-shot.  Stamp duty may be a little less horrible, but horrible enough for traders and investors, and it may not be as much of a long-shot, so traders and investors may be worse off here.

At least we know that Obama and Geithner are against Main Street investors paying a transaction tax and that’s the essence of stamp duty, so both FTT or stamp duty will never be passed with this administration or Republicans.

How can a government charge to stamp traders’ shares, when they fly in and out so fast, they can’t even stamp them. That’s taxation without representation, archaic, and unjustified. 

Jan 20, 2012 11:35pm EST  --  Report as abuse
Stamp duty is just as bad as FTT.

FTT is bad policy because it principally falls on retail investors, pensions and hedgers. Stamp duty tax, or exchange tax is even worse because it entirely falls on retail investors, pensions and hedgers.

Stamp duty in the UK has many exemptions and holes and active investors use non-tax vehicles, not shares. Duplicating the UK scenario is unfeasible on the EU level, and considering this tax will seriously disrupt markets and financial industry in the same way that FTT would too. 

Stamp duty is a mistake at this juncture for even the UK, and the EU should not consider this archaic and illogical tax. They won’t get unanimous consent for it either, with Sweden and others probably saying no. Share trading will move to American and Asian exchanges. 

The EU should focus on tax policy that spurs growth and tax revenues, not ancient tax policy that will retard business, investment, growth and tax revenues. 

Jan 20, 2012 11:40pm EST  --  Report as abuse
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