Robin Hood Tax: Deal likely as France, Germany, Gates raise pressure on EU, G20
We’re definitely into the final furlong for political agreement on a Robin Hood Tax, although of course implementation will take time. On Friday, the French and German Finance Ministers sent EU Commissioners a three page letter with a four page annex making formal proposals for a broad-based Financial Transactions Tax (believed to be set at a rate of between 0.01% and 0.1% although there are no numbers in their letter or annex) – see below for more details. Crucially, they say “we believe the European Union should lead the global mobilisation on this issue.”
Meanwhile, the European Commission itself is planning a discussion at the EU Finance Ministers meeting at the beginning of October – probably very similar, as we understand it’s been written by someone seconded from the German finance ministry. And on a slightly different track, Bill Gates is finalising the report French President and G20 chair Nicolas Sarkozy asked him to prepare on innovative financing for development, which will be discussed at a joint meeting of G20 finance and development ministers in Washington at the end of September. Thence it will go to the formal G20 summit in Cannes at the beginning of November. It is widely believed that Gates’ report will recommend a Financial Transactions Tax – among other mechanisms – to raise funds for meeting the Millennium Development Goals.
So the next eight weeks will be crucial ones for the Financial Transactions Tax campaign. Get ready to campaign hard against frantic lobbying (see the arguments buried in this on Bloomberg) from the finance sector!
The letter from German Finance Minister Wolfgang Schauble and French Finance Minister Francois Baroin is addressed to EU Internal Market Commissioner Michel Barnier and EU Tax Commissioner Algirdas Semeta. The letter sets out some key principles, and in particular resolves – or postpones – the disagreement between France and Germany about what the money raised will be spent on (France says development, Germany says domestic – we want a mix of course, including combating climate change). Some of these principles are worth quoting directly – the detail, mostly aimed at reducing the possibility of evading the tax, is in the annex.
“A global financial transaction tax would achieve the two-fold objective of establishing fair burden-sharing and economic efficiency. …[But] we strongly believe that the implementation of a financial transaction tax at the European level would be a crucial step on the path to reaching a global consensus in a way that does not affect European competitiveness.”
“The finalisation of the allocation of funds raised by a financial transaction tax should not be a precondition for arriving at an agreement on a financial transaction tax.”
“The tax base should be broad and cover all financial transactions related to financial instruments such as equities, bonds, currency transactions and derivatives. A low tax rate should be considered in order to minimise the risk of distortions and circumvention.”