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FTT agreement pushed back. Again.
As reported today, European Finance ministers have failed to meet a year-end deadline on the structure of a tax on financial transactions that was scheduled to be introduced at the start of 2016.
France and Germany had originally hoped to reach agreement on the financial transaction tax by the end of May, making this the second set-back of the year. Despite lengthy discussions, it is still not clear how the tax would be applied in the 11 EU states who have signed up to it, with not even the basic points of any tax agreed – including what to tax, where to tax it, and who should receive the taxation revenues.
The proposed tax has faced a barrage of criticism and opposition, including individual country disagreements and a European financial industry up in arms. The EU Council legal service raised objections last year around the likely impact on country relationships and the wider global economy, as well as its bearing on long-term growth and jobs. The EU’s own examination of the tax showed that it would shrink the economy, hitting investors more than the very banks it is designed to target, so much so that it believes the tax is unlikely to generate any extra revenue at all.
FTT, originally conceived as a quick-fix for the current financial woes in the European economy or a way to end poverty around the world, was expected to generate EUR30-35bn per annum. However, as the scope of the tax continues to be defined, the tax is looking more problematic than the magical revenue source it was positioned as.
Frederic Donnedieu de Vabres, Chairman of Taxand.
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The delay does not bode well for the implementation of the tax, as despite high profile backers across Europe pushing hard for this levy to be introduced, it seems that the difficulty of implementing truly harmonised taxes will eventually prove too much for Europe’s financial transaction tax.