Prospects for EU-wide financial transaction tax 'very uncertain' – KPMG
EUROPE - The chances that the proposed EU-wide tax on financial transactions (FTT) will actually go ahead seem very uncertain, with only three member states clearly backing the plan, a study concludes.
Reviewing the position of national governments on the FTT proposals, advisory group KPMG found that, of the 27 EU member states, only three were clearly in favour, while three were clearly against and 21 were in varying degrees of support, opposition or indecision.
Sarah Lane, financial services tax partner at KPMG, said: "With only three countries clearly in favour, the Commission's proposal obviously has a long way to go.
"Some of the member states that are nominally in favour of the proposal support this subject to an FTT being introduced globally, and the reality is that global introduction is not going to happen, at least not in the foreseeable future.
"So, seen from this angle, the prospects of introduction by the EU seem very uncertain."
Lane said there were lessons to be learned from Sweden's experience of introducing an FTT in the 1980s, which she said had caused the bottom to fall out of the country's financial markets.
"This is a vivid illustration of what many fear may happen if the FTT is introduced in the EU and may well be driving a lot of the current opposition to the proposal," she said.
"In these difficult economic times governments are going to be looking very critically at anything that may drive business away or reduce GDP."
As yet, little attention has been paid to the question of who gets the revenue from an EU FTT, Lane added.
This was clearly a crucial question, she said.
According to KPMG, those countries clearly supporting the FTT plan were France, Germany and Spain.
Seven other countries - Austria, Belgium, Finland, Hungary, Italy, Lithuania and Romania - were more positive than negative, supporting it with conditions such as global or EU introduction.
The three countries obviously opposing the tax were Bulgaria, the Czech Republic and Sweden, while Cyprus, Denmark, Ireland, Latvia, Luxembourg, Malta, the Netherlands and the UK were overall less positive, while supporting it subject to conditions.
Estonia, Greece, Poland, Portugal, Slovakia and Slovenia were identified as neutral, divided or yet to have expressed an opinion on the topic.
According to the draft directive, the FTT would be a minimum of 0.1% for financial transactions not related to derivatives agreements and 0.01% in the case of derivative agreements.
It is only aimed at transactions involving financial institutions and not transactions carried out by ordinary individuals or businesses.
The European Commission originally said the tax could generate revenues of around €57bn annually at EU level.