Financial transaction tax: clearing the next hurdle

A financial transaction tax could come one step closer towards becoming a reality in 11 EU member states if MEPs agree this week for them to go ahead with the tax that aims to ensure that traders also bear their fair share of the cost of the crisis. The Parliament backed an agreement on the tax in May, but the Council did not manage to find a consensus, so some countries have asked if they could move forward with it by themselves.

Infographic on the financial transaction tax
The financial transaction tax is being pitched as a way to get the financial sector to contribute to the cost of the economic recovery

The difficult road so far

In May 2012, MEPs backed a proposal from the European Commission for a 0.1% tax on shares and bonds and 0.01% one on derivatives. The Commission argued that the tax would ensure a fairer contribution by the financial sector towards the cost of the crisis, which it helped to cause. EP wanted the tax to apply to more traders, including those outside the EU dealing with instruments issued in the EU.

The Council was unable to reach an unanimous decision on it as some member states opposed it, notably the UK and Sweden.

A group of member states is now interested in introducing a financial transaction tax in their countries on the basis of the Commission proposals using the enhanced cooperation procedure. This group is made up of Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia.

How enhanced cooperation works

If no consensus can be reached among all member states, then nine or more of them have the possibility to continue within the EU framework without the countries that do not wish to take part. Ever since enhanced cooperation was introduced by the Amsterdam treaty in 1997, this has happened only twice: a divorce law in 2010 and the European patent, which will also be voted on during this plenary.

The need for Parliament's approval

The Parliament will need to give its consent before the Council can authorise the procedure. The debate on Tuesday 11 December and the vote on Wednesday 12 December is about assessing whether the legal conditions for enhanced cooperation have been met. The Commission will publish a revised proposal for the countries taking part later, which will then also have to be evaluated by the EP.

The resolution drafted by Greek Social Democrat Anni Podimata urges the Commission to research the effect of the financial transaction tax on participating and non-participating countries and to draft its revised proposal accordingly.

EP president Martin Schulz said in October: "The European Parliament has been calling for and supporting the financial transaction tax for more than two years.  Although we would have preferred an EU-wide financial transaction tax, enhanced cooperation with up to 11 member states is a good beginning."