EU financial transaction tax plan at risk of ‘withering and dying’

The future of the financial transaction tax, which 11 EU countries have said they will adopt, is uncertain as finance ministers meet today.

Ireland has said it is not interested in the tax unless all 28 member states are ready to adopt it, but is among the countries complaining about a lack of transparency among the 11 espousing it.

There are reports of huge rows among the countries that have said they want to adopt the ‘Robin Hood tax’, including France, Germany, Italy, and Spain.

One EU source said the disputes had become so significant that, while the whole project would not be withdrawn, it was in danger of being quietly forgotten and allowed to “wither and die”.

It is the first tax issue and the third EU initiative being promoted under the enhanced co-operation initiative that allows a number of member states to go ahead and agree a measure between them.

Efforts to have all countries adopt a financial transaction tax failed when put forward by the European Commission in 2010, while the UK last week failed in its challenge in the European Court of Justice to prevent the 11 countries continuing proceedings. The yes side has been accused of holding secret meetings and negotiations, claims that will be discussed at today’s meeting.

“There is huge tensions,” according to a source. “It is without doubt a file that has attracted some of the most bitter discussions and suspicion among member states.”

German chancellor Angela Merkel and French president François Hollande set a deadline of this month — before the European elections — for an agreement that would see a 0.1% tax on all transactions, including on hedge funds and high-frequency trading.

“If it is going to happen now there needs to be some kind of agreement — it needs some political momentum — if it is to go ahead,” said the source.

Three of the countries already have a financial transaction tax while the others are considering introducing their own; Portugal has agreed that its government can create one if it wants.

The danger now, according to some, is that the enhanced co-operation initiative will be abandoned and each country will introduce their own tax with no harmonisation.

Ireland has a stamp duty of 1% on some transactions but not necessarily on those involving hedge funds and fears it will lose traders if it extend it. It yields more than €200m a year.

According to the European Commission, Ireland would gain more than €500m a year from a financial transaction tax.

Britain, which is vehemently against a financial transaction tax, also has a limited stamp duty. It has said it may return to the courts to challenge any agreement that the 11 counties may reach.