Think the financial transaction tax is really an EU tax? Think again.

, by Ophélie Omnes, Translated by Holden James Ferry

All the versions of this article: [English] [français]

Think the financial transaction tax is really an EU tax? Think again.

As the European Union struggles to come up with a budget and its member states appear incapable of coming to any sort of an agreement, the introduction of a financial transaction tax to help finance the EU budget might seem like a welcome idea to some. A welcome idea, that is, if the tax were truly an EU tax, which unfortunately is not the case.

On October 23, 2012, the European Commission published a proposal authorizing ten EU member states (France, Germany, Italy, Spain, Portugal, Greece, among others) to implement a financial transaction tax (FTT) by way of enhanced cooperation as defined by Article 20 of the Treaty on European Union. Estonia is likely to become the eleventh state included in this procedure.

The promising beginnings of an EU tax…

Initially, the FTT had been seen as a good way to apply an EU tax that would provide the European Union with more own resources, independent of the willingness (or not) of the Eurozone member states to contribute to the EU budget. The tax could have also helped make the EU appear more concrete in the eyes of its citizens and do away with its image of being a vague conglomeration of states controlled by political leaders and bureaucrats in Brussels.

Creating such an instrument, however, would have required unanimous approval from the European Council, which unfortunately turned out to be impossible, due, among other reasons, to Britain’s threat to exercise its veto if such a proposal were ever brought to the table. For those countries seeking to introduce the tax, the only choice left was the enhanced cooperation. Introduced by the Treaty of Amsterdam and first used in 2010 in the field of international divorces, the enhanced-cooperation procedure, referred to in Article 20 TEU, requires the participation of at least nine EU countries in order to be approved. Once the enhanced cooperation is approved by both the European Commission and Parliament, it must still be authorized by a qualified majority vote in the Council before it is given the green light.

… resulted in disappointment, with implementation at the national level.

Even though the tax would not have applied to the EU as a whole, the enhanced-cooperation procedure could have been a promising alternative, at least for those countries involved. For a while, people were even saying that the Commission was going to subtract the FTT revenue from those states’ contributions to the EU budget. Doing so would have enabled the EU to guarantee itself at least a small nest egg that wouldn’t be subject to bitter negotiations with its member states.

But here are the facts: The FTT will not help finance the EU budget, nor will it be collected at the European level, but at the national level. In other words, this is NOT a European tax, contrary to what they want us to believe. And to keep telling us over and over again that it is a European tax is just a flat out lie. The FTT is to be collected by the states and used to carry out “European projects” – a rather vague notion that comes with no precise definition, but which does tell us that the revenue from the tax will not help finance the EU global budget. The tax will therefore not be harmonized in the same way in each of the Eurozone member states, since it was not decided at the European level, which it really ought to have been. Instead of one European tax integrating ten or eleven nations, we are getting ten or eleven national taxes, all with the more or less the same goal.

Some will say that the fact that more than one-third of the EU’s member states were even willing to work together in an area as sensitive as taxation is already a step in the right direction, and it’s hard to disagree with that. But we shouldn’t be satisfied with baby steps and mediocrity at a time when Europe needs courage, audacity, and big decisions to help it recover from the crises in which it currently finds itself.

The main problem with Europe is without a doubt the lack of political union and the pre-eminence of the European Council in all critical discussions. Europe is still much too focused on national issues and not focused enough on problems at the European level. It is in the face of impasses like this that the need for a federal Europe is being felt more than ever.

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