Bank tax push at an end

A six-year push to impose a tax on financial transactions in the EU may have run its course, with Germany and France hesitating as they prepare for Brexit and a redrawing of the financial map.

French Finance Minister Bruno Le Maire said this month Brexit could bring “thousands of jobs to Paris,” an opportunity that could be lost if the tax were imposed.

His German counterpart, Wolfgang Schäuble, said that “quite a bit speaks in favour of the French argument to look first at how the Brexit negotiations are going”. With the heavyweight boosters among the 10 countries pursuing the tax getting cold feet, the plan’s future looks bleak.

“Some had said Brexit could prompt further interest” in the financial-transaction tax, said Dan Neidle, a partner at Clifford Chance in London. “In fact it looks like the opposite is the case. Brexit has prompted impressive efforts from the French and others to attract the financial sector — those efforts would be completely undermined by the financial transaction tax.”

The European Commission proposed the tax in 2011 to make sure the industry made a “fair contribution” after taxpayers bore the costs of the financial crisis.

Some member states opposed the levy but a smaller group sought a compromise under “enhanced co-operation” rules.

Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain are still at the table. A decision to impose the tax could benefit Ireland and Luxembourg. Governments have recently grown increasingly wary of pushing the tax while banks in the UK are deciding where to move staff to keep servicing clients inside the single market.

President Emmanuel Macron’s French administration has also made luring firms to Paris a priority. “Sure I want the tax, I just want us to take into account this change that is the UK exiting the EU,” said Mr Le Maire.

Mr Schäuble said the pause “doesn’t mean a suspension until the end of the Brexit negotiations, but one should be a bit more generous on the time horizon”.

Frankfurt has emerged as the biggest winner in the fight for thousands of London-based jobs that will have to be relocated to the EU.

Standard Chartered, Daiwa Securities and Nomura have picked the German city for their HQs. Citigroup, Goldman Sachs and Morgan Stanley are weighing a similar decision, said sources. HSBC is the biggest non-French bank so far to opt for Paris.
n Bloomberg

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