EU edges towards compromise on financial transaction tax proposal

EU finance ministers have agreed to explore a limited form of taxing financial transactions but said they will also work on finding a way to tax derivatives.

Germany is pushing for even a partial deal as the opposition Social Democratic party wants some form of financial transaction tax in exchange to agreeing to the fiscal treaty.

The European Commission has agreed to produce proposals in June.

In the meantime, German finance minister Wolfgang Schaeuble has put together a small working group to come up with alternatives.

One of these is a stamp duty but this covers only shares of corporations listed on the stock exchange, with the tax levied according to the place the corporation is registered.

Germany put forward a document on the issue ensuring a financial transaction tax was added to the agenda of a meeting of finance ministers over the weekend in Copenhagen.

They said this tax was politically and technically possible at this stage, and in the meantime they could continue work on extending the tax to other instruments, similar to the more comprehensive proposal from the commission.

Danish economy minister Margrethe Vestager who chaired the meeting said: “Most of us agree that banks must pay a fair share of the bill of the crisis, but there are many ways of taxing the banks. Some countries support a financial transaction tax, others don’t and would rather explore alternatives. Moving forward, I find it sensible to look at alternative models for taxing the banks.”

Denmark has a 10.5% tax on salaries to counterbalance the fact that banks do not pay Vat while the British stamp duty offers another example, she said.

Britain has been against an EU-wide transaction tax but ministers were surprised by the reaction from British chancellor of the exchequer, George Osborne who did not reject it outright.