Financial transaction tax

Eleven eurozone countries have agreed to press ahead with the financial transaction tax (FTT) after it gained the numbers to use enhanced co-operation to implement the tax.

The FTT, pushed hard by Germany and France but always strongly opposed by the UK, Sweden and others gained the support it needed in a European Union finance ministers' meeting in Luxembourg, when more than the required nine states agreed to use a treaty provision to press ahead with the tax.

The eleven countries are Germany, France, Belgium, Austria, Slovenia, Portugal, Greece, Italy, Spain, Estonia and Slovakia. The agreement between the countries means that for the first time a joint tax could be implemented without the unanimous backing of the 27 EU nations.

The rate or scope of the tax has not yet been determined, although it has previously been proposed by the European Commission to have a 0.1 per cent tax on share and bond transactions, and a 0.01 per cent tax on derivatives.

Austrian Finance Minister Maria Fekter said the eleven countries would present a model for how the tax would work by the end of the year, and expect the tax to be implemented by 2014.

Anni Podimata, the MEP spearheading Parliament's position on establishing a FTT comments:

‘I welcome the decision of 11 Member States to introduce a Financial Transaction Tax under enhanced cooperation on the basis of the Commission proposal of September 2011. It is a socially fair tax, an indispensible part of a complete and coherent solution to exit the crisis.’

The agreement could mean many of Europe’s biggest stock markets including Frankfurt, Paris, Milan and Madrid will have the FTT in place while many of their continental competitors, including London, Amsterdam and Warsaw will not, increasing the divergence in the EU’s ‘single market’.