'Don't hollow out financial transactions tax', says EU tax chief

Sat Jan 18, 2014 5:06am EST

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VIENNA Jan 18 (Reuters) - The European Union's top tax official has called on member countries not to dilute proposals for a financial transactions tax in the euro zone, suggesting the bloc could instead implement the plan more gradually.

Algirdas Semeta, the European Commissioner for tax affairs, told Austrian paper Der Standard he thought a deal was possible in the first half of this year even though some countries wanted to exempt sovereign bonds, interbank securities repurchase deals and pension fund transactions from the levy.

Derivatives and securitised debt, blamed for deepening the financial crisis, may also escape the financial transactions tax (FTT) as policymakers fear it would harm funding for companies and the economy, a document seen by Reuters showed.

The 11 countries discussing the tax, which include France and Germany but not Britain, are trying to hammer out a revised proposal for the tax, which will make banks repay some of the aid that kept them going during the 2007-09 financial crisis.

"The worst-case scenario would be if members agree to an FTT but it is so full of holes that financial transactions shift abroad," Semeta said in an interview published on Saturday.

"In any event the FTT has to be set up differently than existing levies on shares. Simply copying a national system would not work at EU level. One way out would be to phase in individual elements of the FTT over time."

He was not more specific.

If bonds and many other asset classes are exempt the tax would effectively shrink to become a type of stamp duty on shares, which France has already introduced, and which Britain has long had.

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