TALLINN/LONDON Feb 20 Estonia has called for
pension funds to be exempt from a planned tax on transactions in
11 European countries, piling pressure on France and Germany who
want a deal on the levy within weeks.
It aims to recoup taxpayer money given to banks during the
2007-09 financial crisis, and is seen by some politicians as a
vote winner at a time of public anger over bankers' bonuses and
fines on lenders for rigging interest rates.
Attempts at a global tax failed to garner support, leaving
11 euro zone countries to go it alone led by France and Germany.
The two top euro zone countries pledged on Wednesday to push
for an agreement on details of the tax by the European
Parliament elections in May, a tight deadline given that it has
taken years to get this far.
German Finance Minister Wolfgang Schaeuble expects a
phased-in approach, starting with shares, and Wednesday's summit
agreed to include derivatives at some stage, but gave no detail
of other instruments or timeline.
All this is a far cry from the European Commission's
original proposal with its "big bang" start in January for
stocks, derivatives, bonds, repurchase agreements, securities
lending and borrowing, and units in mutual funds.
Even a phase-in is already raising concerns, however, as it
would mean a collection system would still have to be in place
from day one, while revenues would only build slowly.
"For us, the starting point is still the Commission's
proposal, and we would like to adhere to it as much as possible.
We would be hesitant on a piecemeal approach, which is not
cost-efficient," Estonia's finance minister Jurgen Ligi told
Several instruments included in the Commission proposal are
likely to be exempt, lowering the potential revenue to a
fraction of the 35 billion euros a year originally envisaged.
"An important element for us is that pension funds must not
be taxed. I am sure that this will be accommodated by others and
it will not become a stumbling block," Ligi said.
SHARES FIRST IN QUEUE
Some countries want government and corporate bonds exempted
also to avoid harming the economy or putting strain on sovereign
Although French and German officials agreed on Wednesday to
include derivatives, most are traded privately between banks,
making it harder to collect revenues.
Any final deal must be backed by all 11 countries, meaning
each has an effective veto if they don't get their way.
The tax's geographical reach and therefore the potential
revenue may have to be reined in too after lawyers for the EU's
member states said it might illegally ensnare countries outside
the participating 11.
Britain, which is not taking part, is challenging the tax
plan in the EU's top court because it impinges on London, the
bloc's biggest financial trading centre.
The string of likely exemptions and a more restricted reach
could mean a heavier burden on the asset classes that remain to
In countries like Estonia and the other smaller states among
the 11, there are few heavily traded, blue-chip companies
offering the kind of volume needed to make the tax
In a bid to reassure the smaller countries, France and
Germany said in their brief statement on Wednesday that the 11
would jointly examine revenue distribution.
France and Italy already have a tax on shares and Rebecca
Healey of TABB Group consultancy said that had already triggered
a shift in trading from the two countries to Germany.
"It was always our assessment that a political compromise
would emerge at the end of the day that would imply a tax on
share trading," Deutsche Boerse Chief Executive Reto
Francioni told reporters on Thursday.
"I hope the politicians take a look at Italy and France and
see what a financial transaction tax leads to: minus 20 percent
on the cash equities market," said Francioni.
A phased approach will also raise the thorny issue of
whether each step would be legally binding and automatic on all
11 countries or otherwise risk a patchwork emerging.