EU advances plan to tax stock, bonds sales
BY JAMES KANTER, New York Times
BRUSSELS -- A hotly contested tax on financial trades took a big step forward Tuesday when European Union finance ministers allowed a vanguard of member states to proceed with the plan.
The so-called Robin Hood tax would apply a levy to trading in stocks, bonds and derivatives. Although the tax would probably be small -- one-tenth of a percentage point or less on the value of a trade -- it could earn billions of euros for struggling European governments.
Algirdas Semeta, the European commissioner in charge of tax policy, called the decision "a major milestone in tax history" and said the levy could be imposed from next year.
But deep concerns about how the initiative would work in practice could still lead to delays.
The European Commission, the bloc's policymaking arm, still will need to draft the final legislation, and the states in favor of the law will have to give their unanimous approval before it becomes law in the 11 countries that have agreed to send the proposal forward -- two more than the minimum required for legislation to be drafted.
A significant complication is stiff opposition to the tax by Britain, which has the largest trading hub in Europe in London. But because Britain has decided to stay outside the group of states applying the tax, its resistance would probably not stop the plan from moving ahead.
Among the 27 members of the full EU it has firm backing from Germany, France and nine other countries. Others still might eventually support the proposal, which is an idea closely associated with James Tobin, a U.S. economist and Nobel laureate who suggested a version of it in the 1970s.
Although Britain would not be required to assess the tax because of a special European procedure allowing it to opt out, the law could still have an effect on its financial sector by raising the costs of transactions that also involve institutions based inside the tax zone.
The decision to move forward with the tax was "regrettable and likely to serve as another brake on economic growth," Richard Middleton, a managing director at the Association for Financial Markets in Europe, an industry group based in London, said Tuesday.
Backers of the tax originally expected the proceeds to go to humanitarian and environmental causes. But the debt crisis that exploded three years ago and the meltdown in the banking sector have adjusted priorities. Governments are now keener to use the revenue to help prop up shaky banks and help finance the budget for running the EU.
The initiative could generate 57 billion euros annually, or about 0.5 percent of EU output, if it were applied across the entire bloc, according to the European Commission. But that amount is likely to be significantly less without Britain's participation.
The next stage is for Semeta, the European tax commissioner, to propose legislation. He has already suggested a levy of 0.1 percent of the value of stocks and bonds traded, and 0.01 percent of the value of derivatives trades.
One challenge is formulating the law so it does not prompt traders to move to nontaxed jurisdictions.
Another is deciding who pays the tax when traders in cities such as Frankfurt and Paris, where the tax would apply, conduct business with traders in cities such as London or New York, where it would not.
The session Tuesday was the second day of a meeting that began Monday with a session by the finance ministers from the 17 members of the eurozone, known as the Eurogroup. On Monday evening, in a nearly unanimous vote, the group elected Jeroen Dijsselbloem, the Dutch finance minister, as its new president.
Dijsselbloem, 46, has been finance minister of the Netherlands for only three months. In the Eurogroup, he succeeded Jean-Claude Juncker, the prime minister of Luxembourg, who had held the post since 2005 and announced his intention to step down last year. The only formal opposition came from Luis de Guindos, the Spanish finance minister, who said his country and others with comparatively vulnerable economies -- compared with those such as Germany and the Netherlands -- did not hold enough top jobs in the EU's institutions.
At a news conference late Monday, Dijsselbloem emphasized the need to ease mistrust between southern and northern European countries over austerity policies, which many experts say have worsened economic pain in countries such as Spain but have done too little to resolve the eurozone's problems.