11 out of 27 EU countries agree to the financial transaction tax

Oct. 29, 2012 - PRLog -- To launch the project the participation of at least 9 countries is required. The tax implementation is supported by France, Germany and five other EU countries. Italy, Spain, Estonia and Slovakia also joined the tax supporters group.

At the meeting, October, 9, The Council of Ministers of Economy and Finance of 27 EU countries (Ecofin) discussed the implementation of the financial transaction tax by individual EU with the special process of "enhanced cooperation". EC presented a bill for the financial transaction tax for all European Union in 2011. A unanimous decision by the association countries is required to accept the offer in all EU countries, which did not occur. For the implementation of the financial transaction tax within limited number of EU states, the approval of nine countries is required. At the last moment Estonia, Spain, Italy and Slovakia expressed the willingness to support this initiative. These states will have to confirm their intention in writing. Seven other countries have signed a Memorandum of Intent. However, not all EU member states are ready to approve the adoption of the directive, which requires unanimity, and today, the finance ministers acknowledged that they could not agree on the implementation of the financial transaction tax in all 27 EU member states.

In March, the Economic and Social Committee of the EU supported the initiative of the tax implementation, and they agree with the European Parliament’s opinion. In fact, they fully endorse the European Commission's proposal. The directive project involves the implementation of European tax on transactions with shares and bonds (0.1%), and derivatives (0.01%) among the financial institutions.

The financial transaction tax was theoretically envisioned by John Keynes in the 1930s, suggesting that it will help prevent the formation of "bubbles" in the financial sector. Later, in 1970, an equally well-known economist James Tobin developed this idea by proposing a tax on foreign exchange transactions focusing on its performance under the condition of the global application.

"No one should look at this tax as punitive to Wall Street, but rather proactive and positive to allay volatility and to thoughtfully raise revenue from sources other than the middle class or even the upper-middle class," - says Leo Hinder-Jr., a managing partner of the private equity fund InterMedia Partners.

According to the financial advisor Dmitry Chernavski, derivation of the tax, would make sense only if it is administered on a global scale, or at least for the 27 European Union members. Otherwise, a number of countries, the United Kingdom in particular, will receive the primary benefit from this tax, as it is unlikely to join the initiative, Dmitry Chernavski notes. "British exchanges, compared with European exchanges of the 11 countries supporting the initiative, will receive a significant competitive advantage in this process," - says Dmitry Chernavski.

David Stewart, the chief executive director of the London hedge fund firm Odey Asset Management thinks that people will find a way around this tax. "If someone really wants to buy a company that's good, I'm sure they'll keep on buying it. But if it's a synthetic derivative then they may go somewhere else... More volume will go through London."- said David Stewart.

EU Commission, financial transaction tax

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