FTT backers push forward as institutions respond with damning letter
The 11 countries backing the implementation of a tax on financial transactions have begun the push forward, after delays and hesitancy took hold of negotiations.
Yesterday’s European Economic and Financial Affairs Council meeting in Brussels was supplemented by a fringe meeting between the representatives from the backers of the financial transactions tax (FTT).
Finance ministers met in the EU hub to discuss growth and macroeconomic imbalances within the union, with the 11 countries, known as the EU11, meeting beforehand.
While no formal agreement on implementation was reached at the fringe meeting, the countries agreed to continue the push for implementation.
The finance ministers from the largest supporters of the tax, France and Germany, followed yesterday’s fringe event with a meeting in Paris today, with FTT high on the agenda.
This follows criticism from European tax commissioner, Algirdas Šemeta, who in a speech to the European Parliament bemoaned vested interest groups blocking the tax’s progress.
He called on MEPs to fully back the proposals to convince ministers in the supporting countries to push forward with implementation.
The FTT – known as a Tobin Tax after Nobel economist James Tobin – will see derivatives transactions taxed at 0.01% and 0.1% on equity and bond purchases, respectively.
However, today, coinciding with the German and French meeting, several asset managers sent a letter the Council, Parliament and Commission pillars of the EU, and finance ministers in the EU11.
It calls for the immediate removal of the proposals, citing the expected effect on savings and detrimental impact on economic growth.
The letter, seen by IPE, said the impact of the FTT would make European citizens’ aims to take greater control of their financial wellbeing more of a challenge.
The asset managers said the tax would not be one on financial services but rather on citizens’ savings, and eventual retirement incomes.
The letter – signed by Allianz GI, BlackRock, Capital International, Eumedion, Fidelity, M&G PIMCO, Robeco, Schroders, State Street, UBS and Dutch pension fund managers PGGM and APG – joins other research and consultation against the FTT.
The UK, which, along with Luxembourg, refused to support proposals at its initial discussion, launched a legal challenge to the tax.
It argued that its implementation would encroach on its sovereign status to determine tax with its borders.
This followed a report from the City of London Corporation that said the tax would raise the cost of UK Gilt issuance by £4bn, hitting pension schemes significantly.
Research in the Netherlands also highlighted a significant impact on institutional investors.
Finance minister Jeroen Dijsselbloem said the FTT would hit Dutch funds by €250m a year, despite the country not being part of the EU11.
However, Šemeta argued in Parliament that the tax was supported by EU citizens and was in line with the founding principles of the union.
The 11 countries – Austria, Belgium, Estonia, France, Germany, Italy, Greece, Portugal, Slovakia, Slovenia and Spain – formed a enhanced cooperation agreement to implement the FTT.
This allows the EU11 to formulate policy, under the EU framework, for implementation solely in their respective countries.