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 Promised in 2011 by German Chancellor Angela Merkel and the then
French president, Nicolas Sarkozy, as a means of getting banks to
pay for a financial crisis that had then bankrupted Greece and
Ireland, the tax was contested from the outset.
Finance ministers from a group of 11 euro zone countries that back
the tax made a further pledge on Tuesday to introduce it by January
2016 at the latest. Crucial questions such as how high the tax
should be and how it will be charged remain open.
"I believe we will reach a political agreement on a financial
transactions tax, all ministers are ready," Luis de Guindos, Spain's
economy minister, told reporters ahead of a gathering of EU
ministers. "I hope we will reach agreement on the assets to be
included, mainly shares and some derivatives," he said, sharing a
view supported in particular by Italy.
"We want the rules agreement this year so it can come into force
next year," he said. "We still need to decide the level of the tax
and how it will be levied."
Resurrecting an idea first conceived by U.S. economist James Tobin
more than 40 years ago is symbolically important in showing that
politicians, many of whom have been accused of fumbled their way
through the crisis, were tackling the banks blamed for causing it.
As ministers met in Brussels, activists in favor of a 'Robin Hood
tax' - after the British "outlaw" who was said to rob the rich to
give to the poor - acted out a boxing match to symbolize the fight
over the levy.
In one corner, an activist dressed in green and wearing a quiver of
arrows pretended to knock out his opponent who was dressed as a
banker in a suit.
"This is a fight between bankers and Robin Hood," said Natalia
Alonso, a campaigner at Oxfam. "We are saying that the money raised
with this tax should go to fighting poverty."
Reaffirming a commitment to the tax is also important ahead of
European elections that are expected to see a rise in support for
populist euroskeptic parties. Many experts, however, expect the
scheme to be quietly shelved afterwards because it is difficult to
implement.
"TAX ON JOBS, PENSIONS"
Ignoring warnings from the European Central Bank that the levy would
backfire, Merkel and Sarkozy had initially sought to win support
across the European Union before scaling back plans, in the face of
stiff opposition, to just the euro zone.
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Ultimately they had to make do with an shaky alliance of 11
countries, some of whom diplomats said reluctantly signed up to keep
Germany happy. Divisions remain within the group over how the tax
should work, including between Paris and Berlin.
Anders Borg, the Swedish finance minister and long-term critic of
the project, reiterated his opposition to what he called a "very
inefficient and costly tax".
"The lack of information on the (11 countries') proposal is a real
problem," he said.
Britain's finance minister George Osborne told ministers said it was
"a tax on jobs ... a tax on people's pensions", in remarks broadcast
to reporters.
Moreover, it has been clear from early last year that the final plan
will be scaled back, initially imposing a tiny charge on share deals
only and taking much longer than originally intended to achieve a
full roll-out.
Officials have told Reuters that the redesigned levy would raise
only about one tenth of what was once targeted. Officials in
Brussels had expected the financial transactions tax (FTT) to raise
up to 35 billion euros ($49 billion) a year.
Under a re-drafted model, the standard rate for trading bonds and
shares could drop to just 0.01 percent of the value of a deal, from
0.1 percent in the original blueprint.
That would cut income to roughly 3.5 billion euros, or perhaps even
less, said one senior EU official. The tax may now also be
introduced more gradually. ($1 = 0.7205 Euros)
(Additional reporting by Francesco Guarascio Editing by Jeremy
Gaunt)
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