#NoEUtax - Everything you do not want to know if you favour an EU tobin tax by EUDalliance

www.oeiceurope.com

No EU tax Everything you do not want to know if you favour an EU tobin tax

The opinions in this booklet are not the opinions of the OEIC but those of the author. The activities of the OEIC are financially supported by the European Parliament. The liability of any communication or publication by the OEIC in any form and any medium rests with the OEIC. The European Parliament is not responsible for any use that may be made of the information contained therein.

EXECUTIVE SUMMARY Tobin tax lovers - ...for obtaining a direct EU tax Among EU institutions a Tobin tax is the most popular proposal for obtaining an EU tax. Since 1994, the majority in the European Parliament (EP) has been consequently working for some sort of direct tax income, or “own resources” as they prefer to call it. What they want is more money to spend at the budget of the European Union. For example, in the coming long term EU budget for 2014–2020 the EP does not want to cut in the Common Agricultural Policy (CAP). Instead present subsidies to farmers in the old member states will now also be extended to the farmers in the new member states in Central and Eastern Europe. That is why the European Parliament and the European Commission are in pressing need of an EU tax to finance the CAP in the future. The member states are unwilling to pay up so the EP and the Commission must get their own tax income. And for this these two EU institutions have worked since 1994 – but without giving that information to the voters during any of the four election campaigns to the European Parliament since then. The debate of interest is for what purpose the incomes from the financial transfer tax (FTT) should be spent. I do not consider it worthwhile to introduce a new tax if it will be used for the EU budget, already known for waste in many areas of expenses like the Common Agricultural Policy, the Common Fishery Policy, the European External Action Service or unnecessary EU institutions like the Committee of the Regions and the European Economic and Social Committee. Add to that the waste of money in the EU budget resulting from the EP commuting between Brussels and Strasbourg and the need for double meeting venues and offices. Cutbacks are necessary, and urgent, in the EU budget. Every wasted euro in the EU budget is a theft from the taxpayers. For this reason the European Union does not deserve to get more tax money. The European Union is in dire need of an austerity program, more than most of the member states that undergo one at the present time. My comment is that if the European Commission and the EP succeed in creating a Tobin tax, the waste of EU money will continue as at present. No shaping up of budget policy or budget control in the EU will take place, and no need for a reform of the Common Agriculture Policy will be seen. Direct tax income would allow the European Union to continue to swell indefinitely. The European Commission and the EP would, when no longer dependent of the member states’ fees, raise the EU tax every year – except maybe when it is a year of election to the EP (an election where few voters take part anyway). The EU budget needs to be reformed and if there is a political will to do so, it can be financed transparently and fairly through contributions from the Member States based on Gross National Income (GNI) without complex rebates or taxes at EU level. This, in principle, should be the base for constructing a new sort of EU budget. The European Union should be governed by its Member States – not by the EU institutions from above.

Everyone should ask those that are in favor of a FTT what they wish the tax income to be spent on. Very few of those in favor of a FTT would give an answer that is compatible with the wish of the European Parliament and the European Commission where to spend the money.

The political situation at this moment is that an EU tax might very well be implemented, as a majority in the European Parliament wants it, the European Commission wants it, the French president and the German Bundeskansler wants it, and the finance ministers of yet seven countries (Austria, Belgium, Finland, Greece, Spain, Portugal and the Prime Minister of Italy, Mario Monti, who also holds the finance portfolio) have signed up for it. Against these big elephants above, there is an opposition of some member states, also from some political forces and some special interests. If referenda would be held in the member states, it is unlikely an EU tax would be implemented. But in Brussels those in favor knows how to maneuver to get what they want. For example a FTT could be introduced by so-called “enhanced cooperation” with a minimum of nine EU member states. As the FTT needs only one connection in one of the member states that has implemented it, the trade in countries like United Kingdom and Sweden will be affected anyway, even if they have rejected it. So, the reasons for the European Commission and the European Parliament to argue for the introduction of an EU tax can be summed up as follows; •

An EU tax will give the EU financial autonomy and member states can be ignored if they do not want to foot the bill for the expansion of EU policy areas.

•

The EU institutions need more and more money, for example to expand the Common Agricultural Policy budget. The farmers in Western Europe should keep the subsidies at the same time as the farmers in the new Member States in Central and Eastern Europe finally must get the same subsidies as those in the West. This, and a growing number of new policy areas in EU that need to be financed, makes the EU desperate for new incomes.

The EU tax will not be tax neutral unless the member states cut back in their budgets in order to make room for the EU budget to grow. This they are reluctant to do and therefore the introduction of an EU tax is not tax neutral.

TABLE OF CONTENT Groups in the European Parliament mentioned in this booklet What the issue is about – an introduction The EU tax issue – a background The EU tax issue in short Politicians and the EU tax: Where they stand Quotes against an EU tax Quotes in favour of an EU tax The European Parliament demand for an EU tax – a long story 1. The European Parliament’s first mention of an EU tax – April 1994 2. The European Parliament again demands an EU tax just before an election – March 1999 3. The European Parliament steps up the demand for an EU tax – November 1999 4. EU tax again on the European Parliament’s table – July 2001 5. The Council – Ministers of Finance – says no to EU tax – July 2001 6. The European Parliament moves once again towards an EU tax – March 2007 7. The Lisbon Treaty strengthens the European Parliament’s demand for an EU tax – May 2009 8. The European Parliament take up the EU tax demand in connection with the 2011 budget – October 2010 9. The ALDE Group position paper presented in January 2011 10. European Parliament regarding innovative financing at the European and global levels – Tobin tax can be one way in getting an EU tax – March 2011 The European Commission tables their proposal for an EU tax – June 2011 Comments about the Commission proposal for an EU financial transaction tax (FTT) Comments about the Commission proposal for a new VAT resource France and Germany proposes an EU tax – August 2011 The situation at present Why oppose an EU tax

4 5 7 8 10 11 12 13 14 16 18 23 32 33 37 39 40 41 42 47 49 50 51 78

GROUPS IN THE EUROPEAN PARLIAMENT MENTIONED IN THIS BOOKLET PPE - Group of the European People’s Party (Christian Democrats) (1994–2009 PPE-DE) S&D - Group of the Progressive Alliance of Socialists and Democrats in the European Parliament (the PSE group before 2009) ALDE - Group of the Alliance of Liberals and Democrats for Europe (the ELDR group before 2004) ECR - European Conservatives and Reformists (founded 2009) Verts/ALE - Group of the Greens/European Free Alliance (Regionalists) GUE/NGL - Confederal Group of the European United Left – Nordic Green Left EFD - Europe of freedom and democracy Group (EU critical) (founded 2009) NI - Non-attached Members1 EDD – Europe of Democracies and Diversity (EU critical) (existed 1999–2004) TDI - Technical Group of Independent Members (existed 1999-2001) UEN - Union for Europe of the Nations (existed in two different editions – as an EU critical group 1999–2004 and as more a national conservative group 2004–2009) ITS - Identity, Tradition and Sovereignty Group (Extremists, Xenophobics) (existed 2007)

NI – Non-attached Members is not a group as such.

WHAT THE ISSUE IS ABOUT – AN INTRODUCTION This report intends to inform on the facts and opinions around the proposal for the an EU tax, and also to tell the history of the long lobbying from the EU institutions in order to get a direct tax income to the budget of the Union. The incomes of the EU do not follow the increasing expenses because the member states, often ridden by tough cutbacks themselves, do not want to increase their payments year after year. As can be noted below, the federalist majority2 of the European Parliament (EP) has for years and years argued for a direct tax income to be added to the cashbox of the European Union. The large groups, Christian Democrats, Socialists/Social Democrats and Liberals have all agreed on parts of this, but they know that it is not a vote-winning issue, so in the election campaigns to the EP they have all kept wisely quiet about it. In this report, the main arguments in the EP from those in favour and those against an EU tax are presented. However, the members of the federalist majority know that for the next long term budget for 2014–2020 they need a higher income. If they do not get one, they will have to cut into the Common Agricultural Policy or reform it, which they are unwilling to do. They want the farmers in the member states that joined 2004 and 2007 to get the same subsidies as the farmers in the older member states. This would be more favourable than cutting subsidies to the older member states. Occasionally, the EP has had the chance to take advantage of more “popular” tax issues in order to introduce an EU tax. For example, in the beginning of 2011 the members of the federalist majority stated that they are in favour of a Tobin tax, or Financial Transfer Tax (FTT). They see it as a way to 2

Definition of the “federalist” majority in the EP: The EP has a tradition of broad cooperation in between the political families: the Christian Democrats (EPP), the Socialist/Social Democrats (S&D) and the Liberals (ALDE). These three groups, in general, arrange compromises in more or less every political area except some minor issues in areas such as foreign policy where the EP does not have any legislative or decision-making power. The three big groups mentioned above all want the EP to gain influence against the European Commission and the Council. They want Europe to become more or less a federal state – a United States of Europe. The EP and the European Commission are engines for further integration and federalization of the European Union. The “federalist majority” in the EP wants an increased budget financed by an EU direct taxation. It also wants to develop EU policy in areas such as industrial policy, space policy, tourism, education in schools like IT, traffic, sports, languages, Northern polar zone policy and so on. In general, the “federalist majority” in the EP would like to decide everything from foreign policy to the number of school hours for sports lessons in the EU. It would like for just about all political policy areas and issues to fall under European Union control, with the EP being the most important decision maker. National and regional parliaments would play an insignificant role in these visions about the future of the European Union. It must be noted, however, that voters in the EU member states tend to vote less and less in EP elections and pay much more attention to what national and regional parliaments do and do not do. There is an opposition to the federalist line in the EP. Especially from members of the Conservative ECR group, the EU skeptical EFD group and the leftish GUE/NGL group, as well as from some non-attached members and individual members of the three big federalist groups. In the Green/Regionalist group there are also some nonfederalist members even though the group now has a federalist majority.

introduce a direct EU tax without much resistance from the citizens or the member states. Other ideas for direct taxes, such as an EU-level VAT or fees on cell phones, would likely elicit strong public protests. This is not the place to express an opinion on the merits of a Tobin tax. That debate must be taken in other forums. The same goes for Common Consolidated Corporate Tax Base (CCCTB) that has been criticized for crossing too far into the member statesâ&#x20AC;&#x2122; area of taxation. Rather, it is important to consider that the banks paying this tax would almost certainly pass the bill on to their customers, unless lawmakers take specific actions to prevent it.

THE EU TAX ISSUE – A BACKGROUND When the European Economic Common market (EEC) was founded the EEC budget had its own income in the form of custom duties for trade outside EEC, but with free trade developing, the custom duties have been reduced. The EU budget has become increasingly dependent on the member states’ annual fees. The EP does not approve of this, because it makes them weaker compared to the Council and the Finance Ministers. The EP has pushed for direct financing by European taxpayers for a long time. Every year, Finance Ministers from the member states have refused to open their wallets far enough to appease the EP. Unfortunately, the EP federalist majority will not take no for an answer. Therefore, step by step, the federalist majority of the EP has built up their demand for an EU tax – without consulting the citizens. Neither has this issue been clarified in the election campaigns of Members of the EP. To avoid political controversy, the EP is calling the EU tax “genuine own resources.” Some have suggested that a certain percent of the VAT paid by consumers should be directly transferred to the European Union. Others believe that a tax on CO2 emissions should be levied, or that charges on banking and electronic communications should be directly sent to the EU treasury. Even an EU-wide fee on cell phones has been discussed. But an FTT is a more “popular” tax or at least less unpopular than other taxes. Many citizens are critical of financial institutions, so to invent a new tax against them is easier to push through than many other sorts of taxes. However, in the end, for example, the pensioners have to pay by getting a slightly smaller pension because their pension funds had higher costs in the form of a tax. The European Commission tabled a proposal for an EU tax the 29th of June 2011. This proposal is the result of strong lobbying from the EP, which was not satisfied when the EU budget for 2011 was raised a “meager” 2,9% instead of the 5,9% they demanded. But, as can be seen below, Members of the European Parliament (MEPs) are careful to avoid calling the proposal a “tax”:

“It must not be called a European Tax. Once you mix the words Europe and tax in the same sentence it becomes explosive.” Alain Lamassoure, French UMP (PPE), MEP Chairman in the EPs` Committee on Budgets Stated at a press conference 12th of October 2010

THE EU TAX ISSUE IN SHORT The EU budget for 2010 was €141 billion. This money came from two sources: “own resources” and “contributions from EU Member States”. However, the federalist majority in the EP do not consider the current own resources to be “genuine” own resources. The 29th of June 2011, the European Commission presented a formal proposal for an EU tax (misleadingly called “own resources”). There are two parts of this proposal that seek to provide the European Union with a direct tax income from its citizens. First, the Commission wants to introduce a FTT. This tax would be introduced independently within the European Union unless the rest of the world follows suit. The second portion proposes that the European Union directly receives part of the Value Added Tax (VAT). Either way, the purpose is dangerously simple. The EU wants to bypass its member states by receiving direct funding for the EU cashbox. Currently, own resources account for 24% of the EU budget (12% customs duties/sugar levies, 11% national VAT, and 1% taxes paid by European officials, including penalties for breaches of competition policy). The VAT contribution is already an indirect tax levied by the EU. However, the EU itself does not collect the VAT; the member states pay a part of their VAT incomes to the EU. Previously, custom duties provided the EU (EEC at the time) with a substantial portion of its income. Increasing free trade has decreased the funds obtained through custom duties. This, in turn, has decreased the own resources of the EU. This decrease is often used as an argument in favour of the EU tax: supporters say that own resources must be returned to their previous level. Of the EU budget incomes, 76% comes through contributions of the EU member states. Open Europe has estimated that the main net contributors (per capita) for the 2007–2013 period will be the Netherlands, Denmark, Sweden, Germany, Austria, the United Kingdom, France, Italy and Finland3. The Commission and the EP are opposed to this sort of calculation because they believe that it prevents the EU from being seen as a cohesive unit. The net beneficiary member states are not amused by these calculations, either. Negotiations between the EU member states on the seven-year budget periods (at present, 2007–2013) are always intense. This process guarantees that increases in the EU budget remain limited. The introduction of a European tax would allow money to flow directly into the hands of EU institutions, which have shown little interest in limiting their demands for new policies and programme areas within the EU. The European Union should be governed by the member states, not vice versa. The right to directly tax citizens belongs exclusively to the member states.

Open Europe: Briefing note: European Communities (Finance) Bill (2006) http://www.openeurope.org.uk/Content/Documents/PDFs/budget07.pdf

If the EU obtains the right to directly take in taxes, there will be no way back. Tariffs will go up gradually each year, budget demand will increase, and the EU bureaucracy will decide the amount to be paid by citizens. Ordinary taxpayers have little influence on the federalist coalition in the EP, a coalition that has pushed for the expansion of EU projects on nearly every level. The truth is that the EU budget is large enough: the European Social Fund, the European Regional Development Fund, and the Cohesion Fund have all had difficulty spending their allotted monies due to a lack of worthwhile projects. There is, therefore, no reason to increase the EU budget from the current 1% of the European Gross National Income (GNI). An EU tax will only increase the burden placed on people who are already beginning to pay double bills. The European Union now opens embassies around the world, even though member states are unwilling to close theirs. Taxpayers are forced to pay for two embassies in the same foreign country. This pattern of double structure can be seen in many parts of the EU budget, like the Security and Defence Policy which competes with the current NATO structure. We do not need an EU tax; we need better scrutiny of the existing EU budget.

POLITICIANS AND THE EU TAX: WHERE THEY STAND Is there a majority among governments and national parliaments in the EU 27 for an introduction of a direct EU taxation? It is not likely. If there were referendums held in each of the EU 27 member states, it is likely that in nearly no country would the people support such a “reform” of the European Union. Some politicians have made public statements against or in favour of EU taxation. The problem is that during fancy dinners with exclusive wine, leading politicians of the EU might change their mind or make deals where, in exchange for an EU tax, they get more money in subsidies from the EU cashbox. This has happened before. The then president of France, Jacques Chirac and the then German Chancellor Gerhard Schröder wined and dined in the Autumn of 2002 and agreed to postpone a reform of the Common Agriculture Policy until at least after 2013. The other member states then at the following Summit had to accept that as “fait accompli”. That was the most expensive dinner in the history of the European Union so far (for the tax payers, this is). Therefore, to collect quotes from politicians in the member states in which they declare their opposition against an EU tax is important in order to help secure their position in the fight against the EU tax.

QUOTES AGAINST AN EU TAX Here are some quotes both from politicians against and politicians in favour of an EU tax:

“I am against the introduction of an EU tax.” Germany’s Bundeskansler Angela Merkel at a press conference in Brussels on Tuesday November 2, 2010. Report from various News agencies. (However, she apparently changed her mind in August 2011.)

“Right now I try to think of something more unpopular than a new European tax”. British Prime Minister David Cameron at a press conference in London Thursday November 25, 2010. Quoted by Swedish Radio News.

“We do not need more taxes, but less … Europe must try to manage with those resources that exist, and that already are very generous”. British Prime Minister David Cameron at a press conference in London Thursday 25th of November 2010. Quoted by Swedish News Agencies.

“The right to tax – or to govern with own resources – will lead to increased costs and increased taxation. It comes into conflict with the individual willingness to put people to work and the clarity that working pays”. Swedish Prime Minister Fredrik Reinfeldt at a press conference in London Thursday 25th of November 2010 (together with David Cameron). Quoted by Swedish Radio News.

“We do not like the idea of a special EU tax. It would only increase taxes and, we fear, goes in the opposite direction of development in Sweden. We try to head in a different direction, so we are very doubtful of the creation of own resources for the EU”. Swedish Prime Minister Fredrik Reinfeldt at a press conference in London Thursday 25th of November 2010 (together with David Cameron). Quoted by Swedish News Agencies.

QUOTES IN FAVOUR OF AN EU TAX “This year's budget debate again underlines the need to agree on a meaningful system of own resources for the EU. The annual squabbling over the budgets between the European institutions leads to chaotic decision-making and creates an acrimonious diversion, which could be so easily avoided through an own resources system, such as allocating part of the revenue from an EU financial transaction tax, a tax on aviation fuel or a carbon tax to fund the EU budget. Despite this, today's vote broadly strikes a balance between responding to the extra demands created by the Lisbon Treaty, whilst limiting the growth in the EU budgets, in response to current budgetary difficulties”. Raül Romeva i Rueda (Spanish Initiative for Catalonia Greens, Verts/ALE), MEP in an explanation of vote October 20, 2010 in the EP. (Comment: The “squabbling” Romeva i Rueda refers to is merely the reluctance of member states to fund the MEPs' yearly wish list of expenses.)

“ALDE welcomes the initiatives made by the European commission to investigate possibilities for new own resources. In the long term, the increase of existing own resources and/or the introduction of new own resources should aim at replacing the national contributions to the EU budget altogether”. ALDE Group in EP: “ALDE position paper on EU budget post 2013”. (Comment: This illustrates the typical rhetoric that is used to avoid the word “tax”. By “replacing the national contributions to the EU budget altogether”, the EU will be made independent: able to increase expenses at will by raising the EU tax.)

THE EUROPEAN PARLIAMENT DEMAND FOR AN EU TAX – A LONG STORY The EP’s demand for an EU tax has been consistent over the years. Exactly when they started to lobby for a direct EU tax is hard to say but the generation of today can refer back to a report that was tabled in April 1994 (Langes report A3-0228/1994). Over the years the EP has gradually become more and more outspoken about wanting an EU tax. But this is unknown among national politicians and especially among the citizens. The issue has been carefully avoided by the party headquarters election teams since it is not a vote-winning issue. Neither have the Christian Democrats, the Social Democrats/Socialists, nor the Liberals seen any need to debate an issue on which they all agree – that the European Union should have independent, direct financing through an EU tax of some kind from the citizens. The three main political parties wish a direct link existed between the EU finances and the citizens´ wallets. However, this is not a popular topic to explain to the citizens, who must pay up. The following section about the debates in the EP on EU taxes over the years might be of more interest to those who really want to get into historical details. The important issue is that everyone must be reminded that the EP’s majority has stated on several occasions that they want an EU tax to be introduced to strengthen the EU budget. Sometimes they have stated this just before elections to the EP. However, even though they stated this very clearly, the issue has not in any way been debated or highlighted in election campaigns of the EP. No doubt, introduction of an EU tax is not a vote-catching issue and therefore the large political families have kept quiet about it. These three political families agree with each other on this. Why debate something they agree on?

THE EUROPEAN PARLIAMENT’S FIRST MENTION OF AN EU TAX – APRIL 1994 It is possible that the European Parliament might have mentioned the issue of an EU tax – “own resources” in some resolution earlier. But the first time the subject got a resolution of its own seems to be in April 1994, just before the European Parliament elections of June that year. On Wednesday the 20th of April, 1994 in Strasbourg, Horst Langes (German CDU, PPE group) presented his report (A3-0228/1994) on the system of own resources for the European Union. It was approved by the plenary the day after. There were some separate votes but no Roll Call Vote (RCV)— not even on the resolution as a whole—so the groups must have generally been satisfied with the content. The approved resolution contains some interesting parts. The parts as follows are of interest in the debate of today: “(…) H. whereas a democratically evolving European Union must be financially autonomous within its sphere of competence, while respecting the subsidiarity principle, one reason being the fact that national parliaments can not take sufficient account of the European perspective, (…) 1. Calls on the Council and the Member States to create a genuine system of own resources for the Union before the current financial perspective expires in 1999 and to begin negotiations on such a system of own resources within the framework of the Intergovernmental Conferences in 1996; (…) 7. Calls for the creation of a system of own resources in which revenue is generated in such a way as to establish a direct link and accountability between the European Union (through its budgetary authorities: the Council of Ministers and Parliament) and taxpayers and which thus fosters the democratic bond between the Union and its citizens; (…) 8. Is convinced that the first two categories of levies, premiums and compensatory amounts and custom duties, constitute own revenue on the basis of the Community’s responsibility for external trade and should be maintained as such; points out, however, that there will be a continental decline in such revenue, particularly owing to the recent GATT agreements and the CAP reform now underway; 9. Is convinced that a new third source of revenue should be created in place of the existing third and fourth resources which should take the form of a specified percentage of VAT, given that, despite all the discussions about a ‘fair’ definition of the basis of assessment, VAT still represents the most reliable basis for own revenue: VAT is politically controllable, it is well-known and familiar to the taxpayers in the Member States and it can and must be harmonized throughout the Community; 10. Is convinced that a Union proportion of VAT, directly imposed on the basis of tax declarations and denoted as such on invoices, is the most appropriate means of meeting the demands of being simple and transparent and constituting an effective link between the taxpayer and the destination of the tax (European Union); (…) 12. Takes the view that the increasing transfer of tasks from the Member States to the Union should be matched by appropriate transfers of own resources which can be easily adapted to those tasks which are necessary and desired; (…)

21. Takes the view that the transfer to the Community of an increasing number of political powers in fields such as agricultural policy, external trade, internal trade, development aid, transport and social policy and economic and monetary policy should go hand in hand with corresponding action to provide the Union with democratic legislative powers, which would include both tax and budgetary powers and appropriate financial autonomy (‘no representation without taxation’); (…)” In short, the EP realized that incomes to the EU budget would be reduced, because the customs duties would fall due to international trade agreements. They wanted to go for a direct EU VAT paid by the consumers directly to the European Union. Just after this resolution was approved in the EP, there were elections in the then twelve member states to the EP plus referenda in four states on whether to join the European Union or not. The issue of the introduction of an EU tax or that the European Union must be financially autonomous within its sphere of competence was not up for debate anywhere. The idea of creating a federal European state does not resonate with voters, so it is better for federalists to keep quiet about it.

THE EUROPEAN PARLIAMENT DEMANDS EU TAX AGAIN – ONCE AGAIN JUST BEFORE AN ELECTION – MARCH 1999 Five years later, just before the next election to the EP, they came again with the demand of own resources for the Union in the Haug report (A4-0105/1999) on the need to modify and reform the European Union’s own resources system. In the debate Tuesday the 9th of March, 1999 in Strasbourg many Members of the EP complained about the British rebate on their fee to the Union. Another hot topic was the question of co-financing the agricultural policy between EU and the Member States when the EU budget was shrinking in this area. Two interesting quotes from the debate: Esko Seppänen (Finnish Left Alliance, GUE/NGL group) came clearly out against an EU tax. His speech was as follows:

“Mr President, Commissioner, I have noticed in this debate that those countries which are net beneficiaries do not wish to speak about net contributors or net beneficiaries, whereas this is exactly what the countries that are net contributors want to talk about. The issue is the financing of EU enlargement. We are now fighting over who is going to pay for it. On that basis I would like to express an opinion which is important to me and from our point of view generally. The total EU budget should not be increased by more than 1.27 %. The EU should not be given the powers to tax its citizens or collect taxes in the Member States: the money must be collected from the Member States themselves. The best basis for calculating how much each Member State should pay is GNP. I do not think it is out of the question to increase the share that agriculture itself contributes. It will only divide up EU income and expenditure in a new way, but we cannot object to that in principle.”

Herbert Bösch (Austrian SPÖ, PSE group) also said something interesting. A quote from his speech:

“… Mrs Haug has also paved the way for what we will in the final analysis need on the revenue side, namely European revenue in the form of European taxes. Only then will we see an end to the interminable debate about who is the biggest net contributor, who is the biggest net recipient, which is what it is obviously all about just now. …”

The resolution that was approved by the EP is in line with the previous resolution from April 1994. There are some interesting points: “(…) N. whereas the introduction of new own resources that do not increase the burden on the European taxpayer can make the revenue system more transparent, more straightforward and more rational, increase the Union’s financial independence and establish a direct link between the European Union and its citizens, (…)

9. Believes that, if the EU’s financial independence is to be ensured, its tasks are to be financed and it is to be able to develop in longer term, the budget should be based on new own revenue not constituting Member State contributions that must not lead to an increase in the total burden on the European taxpayer; emphasises that increasing the financial endowment also means giving the Union clear responsibility for the relevant fiscal legislation, including appropriate power to raise revenue; 10. Believes that revenue which goes directly to the Union is of direct relevance to the citizens of Europe, that it must have their approval as far as possible and that it should be logically related to European integration and European tasks; emphasises that such revenue must satisfy the criteria of simplicity and comprehensibility, fairness, transparency and democratic controllability; 11. Points out that the European Parliament has commissioned two studies on the choice of suitable new sources of tax and revenue, in which the advantages and disadvantages of different forms of revenue are considered; points out that, as no kind of tax has proved to be optimal in this context, the Union’s future financial autonomy must be ensured by a combination of different forms of new revenue, with the greatest possible account taken of the criteria referred to; (…) 20. Gives its initial endorsement, therefore, to the proposal that VAT-based and GNP-based own resources should be combined in a transparent, simple source of own resources the calculation of which is comprehensible, which is based on GNP and on the basis of which a fundamental reform of the own resources system and the introduction of new forms of own revenue in place of the present third and fourth sources of revenue can be addressed; (…) 23. Calls for any agreement reached by the Member States on certain types of tax to provide for at least some of the yield to accrue to the Union budget as own revenue, since these taxes will then be of a primarily European nature; 24. Emphasises that such new revenue for the European budget should not be additional, but should replace existing revenue; 25. Urges the Council to approve such a reform in agreement with Parliament so that it can be brought into force before the next round of enlargement; 26. Believes that the gradual reform of the system of own resources should be considered during the negotiations on the interinstitutional agreement on the financial perspective 2000-2006; (…)” This resolution was approved by 276 votes in favour, 154 against and 47 abstentions. The groups were more or less all of them divided on this issue. But the majorities in the PSE, PPE, ELDR and Verts groups voted in favour. Once again, just after this resolution was approved in the EP there were elections in the then 15 member states to the EP. The issue about introduction of an EU tax and the EU’s financial independence was not up for debate anywhere. The idea of creating a federal European state does not resonate with voters, so it is better for federalists to keep quiet about it.

THE EUROPEAN PARLIAMENT STEPS UP THEIR DEMAND FOR AN EU TAX – NOVEMBER 1999 In November 1999, in the Fifth EP which was elected in June 1999, EU taxes once again were on the agenda. Tuesday the 16th of November 1999 in Strasbourg the EP debated the Haug report (A50052/1999) on the proposal for a Council Decision on the system of the European Union’s own resources based on a European Commission document on this subject (COM(1999)333). Jutta Haug (German SPD, then PSE group) introduced the debate as rapporteur. She said as follows:

“Mr President, ladies and gentlemen, we are getting down to serious business now, for this is about our money, or the European Union’s revenue to be precise. The discussions we are having today on reforming the system of own resources are directly related to the discussions we had and the decisions we reached in the spring of this year. I would like to draw your attention to the Commission’s comprehensive report, which presents a thorough analysis of own resources and has presented many of the options for reform which come up in discussion. We established our position on the own resource system, as a Parliament in March, with full knowledge of this report and following very full discussions. Unfortunately, the Berlin Council was unable to reach agreement on an actual reform step but contented itself with the kind of haggling for which it has long been famed. The outcome of the Berlin conclusions has been further complication of the own resources system and restriction of the European Union’s financial room for manoeuvre. This situation cannot be allowed to continue. We must put an end to the situation in which each Head of Government and Finance Minister in the Council only has the short-term interests of their own country at heart when it comes to planning our revenue, regardless of the consequences. This Community can only be sustained and developed if our common interests as a whole and our longerterm aspirations are taken account of, and if we are prepared to invest in this. In this connection, it is the Council’s policy in particular that merits condemnation, for it persists in committing expenditure at international donor conferences, the burden of which falls to the European budget, without ensuring that the corresponding revenue is in place. That being the case, the Council is not taking its dealings with the European Union’s revenue very seriously – and that is putting it mildly – and it may, in the forthcoming enlargement process, become a real handicap capable of obstructing our opportunities for development. However, I am also disappointed with the proposal put forward by the Commission on changing the own resource system. Of course, we are not under any illusions; we too are aware that the Council was not about to perform a dramatic about-turn at some point from the spring onwards, and initiate farreaching reform. Obviously, I recognise that where our proposals are concerned, the Commission, as must we as a Parliament, has to take into account the mood in the Council and the positions adopted there if we want to achieve a workable outcome. Nevertheless, the Commission could have done more, in fact I would go so far as to say that it should have done more. It has trailed snail-like behind the Council, only to now place before us as a proposal something that follows the Council’s agreement to the letter. But it is also the role of the Commission to be the driving force of integration; at the very least, it must fulfil its role as guardian of the Treaties, warding off any regulations which could damage the Community. In my view, it has failed to do so in the

case of the present proposal. However, I would not want to spare us as a Parliament a certain amount of self-criticism either. We too could have been more courageous in our demands in respect of reform of the own resources system, and ought to have paid less attention to the discussions taking place at national level. At all events, we are going to have to be more consistent in the next round of reforms – which ought not to be too long in coming – if we want to ensure that the Union still has the financial power to act after enlargement and once it has additional tasks. That is why we want to commit the Commission to making the schedule tighter than it envisaged doing in its report. Allow me to make clear in a few points the work that we can and must get under way if we are to change the own resource system in such a way that it will also be possible for there to be progress towards reform. Firstly, planning the European Union’s revenue must be undertaken in accordance with a number of fundamental principles, without which the system would be unable to function indefinitely. This means that we need a system that is transparent, uniform and balanced. In the long-term there must be a direct link between the citizens of Europe and the European Union’s financing of its expenditure, and for the benefit of those individuals who are now calling again for there to be an increase in taxation, I would like to make quite plain that of course there must be no increase in the overall tax and contributions burden borne by the citizens, but then that was the position we took up back in March as well. In the foreseeable future, as long as the budget is financed by the Member States, this principle means in practice that financing must take place under the same conditions for all concerned. There must be no more derogations or rebates in the future. We in the Group of the Party of European Socialists have reached agreement on this demand, and that includes those individuals from Member States that continue to benefit from such derogations or are hoping to benefit from them soon. It represents a great step forwards and I am very proud of it. Indeed, I would call upon all the groups to support this compromise, which will be presented to them in the form of an amendment. Secondly, securing and consolidating our financial power to act also means acquiring new forms of revenue that we can truly call our own and that will replace the previous ones. But above all, it means not tampering with the only sources of income that are truly ours, that are the Union’s by right, that is to say, our traditional own resources. But this is exactly what will happen if the Commission’s proposal is implemented. If the refund – to be retained by the Member States – of the costs associated with the collection of these traditional own resources were to be increased by 150% then such fears would certainly be justified. Unfortunately, the majority in the Committee did not support my request to leave this refund at 10%. Personally speaking though, I am able to warmly endorse the present draft amendment, expressive as it is of the desire not to raise the amounts Member States are permitted to retain to 25%, for this would leave the traditional own resources intact. Thirdly, if there is to be transparency, balance and manageability then the basis for financing must be unambiguous. The essential pillar as far as the current financing framework is concerned, is the gross domestic product of the Member States. This must continue to be the case for as long as the EU is financed by the Member States, for any other method would distort the system and render it illogical. The own resources ceiling of 1.27% expresses what proportion of gross domestic product has to be devoted to the European budget. This figure has become a politically reliable basis for cooperation based on partnership between Parliament and the Council. That is why it must be maintained and must not be changed arbitrarily. These are a few aspects of the proposal I am putting to you concerning changes to the own resources system.

Unfortunately, there is no possibility of doing more at the present time since we have only limited room for manoeuvre in our actions. The consultation procedure in force here and, above all, the restrictive framework created by the Berlin Council’s agreements mean that we can only be moderate in our dealings. I would ask you all though, to at least give me your support as far as these draft amendments are concerned.” The British rebate was again taken up by many speakers in the debate. As for the introduction of an EU tax, there were few speakers that were clear. For example Kyösti Virrankoski (Finnish Centre Party, ELDR group) said, cryptically, the following:

“… Mrs Haug’s report contains a proposal whereby a report on amending the system should be drafted before 2004. It should examine in particular concessions on contributions and the possibility of creating a new system of own resources that would relate directly to the public, without increasing their burden of taxation. The Liberals support this reform, all the while stressing that the burden of taxation must not be increased. Perhaps new forms of own resources could include environmental protection taxes, as environmental questions concern all, and not just the new Member States. …” To be clear about the introduction of a direct EU tax is not popular and was therefore avoided by the EU tax supporters. Two speakers had something interesting to say, however. Florence Kuntz (Rassemblement pour la France, from then at that time EU critical UEN group that existed) spoke out against the Haug report:

“Mr President, the Haug Report, which is before this House, presents an eminently political problem, the problem of financing the Union by means of its own resources. In other times, French leaders would not have hesitated before adopting the policy of the empty chair on such a matter. Today, unfortunately, our country is the great loser of the Berlin Summit where the Fifteen agreed upon the review of the Union’s system of own resources. In Berlin, we effectively acknowledged the principle according to which some rich countries, those from the northern part of the Union, were paying too much, hence the revised weighting of Member States’ financing shares, resulting in the increased participation of France to the tune of several billion francs. It is, moreover, obvious that limiting the participation of some Member States in financing the UK rebate will have the effect of increasing the contribution of the others. As far as this corrective mechanism in favour of the United Kingdom is concerned, we obviously share the opinion of the Haug Report, which proposes that this privilege is gradually phased out, whereas the Commission is proposing only technical adjustments to the reform. We are opposed to the Haug Report, however, when it proposes to gradually reduce the system’s dependence on Member States’ contributions and to achieve financial autonomy in the long term. Financial autonomy, fiscal autonomy, is this not all leading up to the introduction of a European tax by the back door? At any event, financial autonomy of this type is still in line with that same rationale which we are clearly against. Ever greater integration, ever greater federalism within Europe, always to the detriment of nation states, eliminating their last remaining area of sovereignty, their fiscal sovereignty. We cannot accept this and we shall be voting against this report.” Per Stenmarck (the Swedish Moderate Party, PPE-DE group) was also critical:

“Mr President, the EU will be faced with having to make very large financial investments when, in different rounds, ten or more countries from Eastern and Central Europe and from the Baltic region become members. Clearly, there is occasion for discussing the EU’s financial requirements if this process is to be managed successfully. At present, the EU is not entitled to raise taxes itself. Nor, as I see it, should it be entitled to do so in the future either. The Haug report does not involve our automatically introducing taxation by the EU, but it opens the door for taxation of this kind, which is bad enough. What is not spelled out is nonetheless what a lot of people are obviously thinking. In the last few days, the Swedish mass media have been saying that the EU intends to introduce a tax on flights and mobile telephones. It is perhaps no accident that it is precisely in Sweden, which has far and away the heaviest burden of taxation in the EU, that imaginations are running riot when it comes to finding new forms of income from taxation. If taxes are to be directly discussed at all within the EU, then the Member States must first, in my view, show clearly and precisely which national taxes are to be reduced at the same time. Otherwise, our citizens will just be afflicted with new forms of taxation, and the EU’s citizens do not need still higher taxes. How, then, is the enlargement of the EU to be financed? Yes, the alternative to new income from taxation is still that of reduced costs. This will involve better prioritising and concentrating on the major and crucial questions. The enlargement of the EU is one such priority. As long as almost half the EU’s budget goes on subsidising agriculture and as long as five sixths of it, including the Structural Funds, goes on subsidies of one kind or another, there can be no doubt that changes can still be made.” As Per Stenmarck from Sweden mentioned, there was a debate in Swedish media about EU tax or direct fees to the EU cash box. Examples that were mentioned were a tax on cell phones at around 35 euros per subscription or a tax on every trip by airplane at around 13 euros. The maximum 1,27 % of GDP that the EU could get from the member states was not enough to cover the costs for EU enlargement. Göran Färm, Swedish Social Democratic MEP, stated in Swedish media that with an EU tax there could be more long term planning and that political discomfort in the national governments could be avoided, especially since money must now be taken from the Member States cashboxes to be given to the European Union each year.4 This should be interpreted as follows; the citizens will in the future protest against raises of the EU membership fees and in order to avoid this, it would be easier to introduce EU taxes that the citizens cannot avoid. The Haug report (A5-0052/1999) on EU own resources proposed amendments to the Commission proposal for a Council Decision on the system of EU’s own resources. It was a consultation procedure for the EP so their amendments were just political statements that could be ignored by the Council. Some amendments clearly showed the willingness of the majority in the EP to see an introduction of an EU tax. Amendment 3 reads: “Whereas the continuous development and forthcoming enlargement of the European Union make a dynamic reform of the revenue system necessary; whereas such a reform must be designed to increase the Community’s financial autonomy and establish new forms of own resources without increasing the overall burden of taxes and charges on the European taxpayer and with due regard for the economic performance of the Member States; whereas the planned changes to the system

Aftonbladet 991112 “EU: Inför skatt på mobiltelefoner” Emily von Sydow

of own resources must come into effect immediately and the preparation of further reforms must be speeded up;” Amendment 6: “Whereas, to ensure this for the future, the EU must move steadily away from dependence on transfers from Member States; whereas, in the long term, the own resources system must be modified with a view to achieving financial autonomy;” Amendment 15: “ … the Commission will submit, before 1 January 2005, a proposal for a Council decision which will replace this Decision on 1 January 2007; whereas that decision is to include provisions concerning the replacement of the VAT resource by new, autonomous own resources; whereas those new resources should be directly connected with ordinary citizens and not increase the tax burden they bear; whereas, furthermore, provisions should be included for the gradual phasing-out of the compensatory mechanism established in favour of the United Kingdom; …” The Commission proposal as amended by the EP was approved with 337 votes in favour, 167 against and 48 abstentions. The resolution was approved with 334 votes in favour and 153 against with 60 abstentions. In favour were the large majorities in the PPE, PSE, ELDR and Verts/ALE groups. Minorities in the PPE and PSE groups voted against as did most of the members of the Leftist GUE/NGL group. Around 30 PPE members abstained. Many Spanish and English members of PPE and PSE voted with the minority positions in their respective groups.

ONCE AGAIN - EU TAX ON THE EUROPEAN PARLIAMENT´S TABLE – JULY 2001 On Wednesday the 4th of July, 2001 in Strasbourg, the EP debated the EU own resources in 2001–2002 budget. The Haug report (A5-0238/2001) on the situation concerning the European Union’s own resources in 2001 was tabled, among other documents. This was the third report from Jutta Haug on this subject. The report was written on the EP’s own initiative. That is, this was a pure lobby document for EU tax from the EP versus the Council and the member states. Jutta Haug (German SPD, PSE group) was rapporteur and was also the first to speak. Among other things, she said:

“… We – Parliament – have taken the initiative and called on the Council to discuss with us, prior to every budget procedure and before the Commission produces its draft budget, the situation concerning the European Union’s own resources. Please note that I said ‘discuss’, not ‘codecision’. We thought this was a very cheap option, but far from it, the Council is resisting, and that is what it is doing this evening too. It is simply not listening! It refuses even to discuss the European Union’s revenue with us. As a result, we looked at the EU’s own resources without having discussed them with the Council. What we noted for the 2001 budget year is no different from the trends observed in previous years. Traditional own resources and VAT resources are becoming less and less significant. The transfers from the Member States as a GNP resource share have increased steadily. In total, own resources constitute 98.3% of revenue for the 2001 EU budget. This is equivalent to 1.06% of their GNP, which is far less than the own resources ceiling percentage of 1.27% laid down in the financial perspective. This shift towards the GNP resource can undoubtedly be viewed with mixed feelings. It could lead to a fairer division of burdens between the Member States, as GNP is probably the best indicator to measure the relative wealth of the Member States’ economies; indeed, if we look more closely, some Member States already cover 22, 29 or even 33% of their contributions to the European budget from traditional own resources – in other words, from money which has already belonged to the European Union for some time. Secondly, it changes the nature of the European Union’s own resources, transforming them from real own resources into a form of Member States’ contribution. Thirdly, it simply does not create a visible link between the European Union and its citizens. When the Belgian President of the EU, Prime Minister Guy Verhofstadt, spoke this morning, it warmed my heart. He too is questioning this indirect financing of the European Union. He too is calling for more transparency. He too wants citizens to become more familiar with the European Union, and this includes more transparent financial arrangements. We want financial autonomy at European level, and we want to work towards this now. We want this financial autonomy to be shared jointly and on an equal basis with the Council, and we want to have codecision rights in this area. We want equal rights in all areas; we want to be one of the two arms of the budgetary authority, in respect of all expenditure and all revenue. We want complete budgetary autonomy. A European tax may still be a long way off, but the Belgian presidency, the Belgian President

of the European Union himself, has called for this. The Belgian Finance Minister supports this demand, and even the German Finance Minister no longer rejects it outright. A European tax may still be "future music", as the Germans say, but if we do not start playing it now, we will not be dancing to it in future.” Other MEPs that mentioned an EU tax in their speeches said as follows: Markus Ferber (German CSU, PPE-DE group) said the following on the subject:

“… I should also like to make several comments on the issue of own resources. Ms Haug, according to my information, a separate European tax was already being debated before my time, namely in April 1994. It would seem that even then, people were making music that nobody danced to. I am not sure whether it is useful at this stage to initiate a debate at European level on financing through taxation. Let me say this quite clearly: we have other priorities first. The first task which Europe must address is the issue of a more precise delimitation of powers between the European Union and the Member States. The public would also like to have some answers. What is Europe responsible for, and why does it need money? In a second step, we must of course discuss what kind of long-term institutions are required in Europe so that the tasks entrusted to Europe can be performed in a democratic and transparent way. Finally, at the end of this process, decisions must be taken on how the necessary resources can be made available. I think that if we approach matters on this basis, we will be on the right track. By supporting a European tax at this stage, Europe’s citizens are more likely to be frightened off by what is happening here. It will not help us to achieve lasting acceptance among citizens in the European Union. …”

Salvador Garriga Polledo (Spanish PP, PPE-DE group) said:

“… In any event, in this joint debate on Supplementary and Amending Budgets Nos 3 and 4, the mandate for the budgetary conciliation and the report on the situation concerning the European Union’s own resources, the PPE-DE Group wishes to state that it is voting unanimously in favour in the first two cases and in favour by a majority in relation to own resources. Clearly, the most potentially controversial issue in this Haug report relates to Parliament’s support for the possibility of opening a debate on the establishment of a direct Community tax which would be a source of autonomous funding for the Community budget. Within all the groups. Mr President, there are differing sensitivities in relation to European integration, and this is all the more obvious when it comes to funding issues. Therefore, Mrs Haug’s tendency towards this possible tax is too much for certain national delegations. However, I believe that the majority of my Group will possibly agree with it. …”

Esko Seppänen (Finnish Left Alliance, GUE/NGL group) clearly opposed the idea of an EU tax in his speech. He said the following:

“Mr President, I wish to speak about own resources. The tables appended to Mrs Haug’s report and dedicated to the subject of own resources do not give a correct picture of the different share of contributions among the Member States. It has to be said aloud that the United Kingdom is one of the EU members getting a free ride. It has been given a reduction on contributions. It should form part of the report’s conclusions that the United Kingdom should be made to pay its contribution according to the same principles as everyone else. In addition, the report’s statistics disguise the real situation with respect to the customs duties the UK collects on behalf of the EU. But customs duties disguise the share of contributions made by Holland and Belgium still more, as these countries also collect customs duties on goods bound for other countries. Holland and Belgium are not the large net contributors the figures show them to be. The report’s conclusions call for the introduction of a special European tax. This is no mere accident. The country holding the presidency, Belgium, has also announced it will pursue the issue. There are two different opinions on this in our group. The tax is supported by those who are guided by the spirit of European federalism, while those who wish to preserve their national sovereignty are opposed to the EU having the power to levy and collect taxes. Federalism is the making of the European Union into a federal state. If the EU is given the power to levy and collect taxes we will be paving the way for federalism. As a representative of taxpayers in a small net contributor country I cannot endorse European taxation for the purposes of a federal state. Mrs Haug’s conclusion in her report is too radical.”

Den Dover (British Conservative Party, PPE-DE group) also opposed the idea of an EU tax:

“Mr President, I too want to speak about Mrs Haug’s report on own resources. Her advice that we should go for a European tax is premature and unnecessary. She says that the Belgian presidency is expected to put this forward or start a debate. I have read the notes on the work programme by the Belgian presidency and there is little or no reference to it. There is only one reference to the tax on flows of speculative capital – the so-called Tobin tax. That was voted down by Parliament only a few months ago. At the end of the document there is also reference to direct or indirect funding of the European Union, so that we can once again operate with the European Union’s own resources. I put to her that the Prime Minister of Belgium only, in the last few days, said that he does not want to pursue this path towards a European Union tax because "it is sensitive". It is very much a sensitive matter and totally unnecessary. Mrs Haug mentions that the amount of money coming in from the nation-states through gross national product is going to rise. I accept that. I sat in the House of Commons in the United Kingdom for 18 years before coming into this Chamber. I always thought it was marvellous that the percentage of gross national product coming into European spending was declining. That downward path has continued during the last two years. I applaud that. It shows good and effective control of spending and nationstates do not mind passing on that money to the European Union. I see no reason whatsoever for the European Union to raise its own direct tax. That is why I have tabled four amendments tomorrow for voting. Two of those will be on a roll-call vote. You can see this evening that there is opposition from various countries. I hope that people will vote in support of my amendments and oppose the European tax.”

Per Stenmarck (Swedish Moderate Party, PPE-DE group) again opposed the EU tax in his statement:

“Mr President, this debate on the EU’s own resources and on EU tax is familiar to us all. It comes around every year. The positions are well known, and in a way it seems quite unnecessary to repeat the debate and decisions year after year. Apart from the questions of pure principle, one might wonder whether higher and new taxes are what EU Member States and EU citizens really need. We are all highly taxed. Certain Member States have some of the highest taxation levels in the world – I myself come from one such country. If we look at them, it is hardly these countries which have experienced the greatest economic growth in the last decade. Of course the report talks about tax in total not increasing. However this is a theoretical proposition which has very little to do with practical reality. I also believe it is the case that if a tax is introduced, particularly a new tax level as in this case, taxation will also increase. It is almost inevitable. I would also like to mention the fact that the rapporteur says he is seeking to strengthen the link between the Union and its citizens’. This is no doubt admirable and important, but in my view it should happen in a completely different manner. I am very doubtful indeed whether people would feel any stronger connection with the EU through having to pay higher taxes than they do already.”

Juan Andrés Naranjo Escobar (Spanish Partido Popular, PPE-DE group) also spoke about EU tax and stated:

“Mr President, Commissioner, ladies and gentlemen, to jointly debate the system of own resources and the next budget at the point of conciliation reinforces the idea that income and expenditure are two sides of the same coin. There have been calls here for fiscal autonomy and codecision for income and expenditure, but first we must achieve suitable and fair funding of Community policies and we already know that there are differing opinions about the most efficient system for achieving it. Sooner or later we will have to reach a permanent agreement, but first we will have to debate and clarify the issues selected at the Nice Council. It seems a pointless exercise to talk about a new philosophy for own resources without having cleared up the fundamental unknown factors first. It is not very prudent to begin building a house from the roof. In any event, to use the argument of the issue of net balances – as has been done – does not move in the right direction, but, for many reasons, contributes to undermining the principles of the Union. The question today is whether the new decision on own resources effectively makes progress towards greater equity and transparency and takes more account of the Member States’ tax capacity. It is clear that the gradual reduction of the maximum reference rate for the VAT resource contributes to correcting the regressive aspects of the system in force. The Member States’ contributions via the fourth resource or VAT must be proportionate with their contribution to the Community GDP as a key element of safeguarding the equity of the system. Therefore we must keep up our efforts in this direction. The proposal also has some negative aspects, which are far from negligible. The maintenance, albeit with a modification of the calculation system, of the so-called correction of budgetary imbalances in favour of the United Kingdom, confirms that this procedure is totally contrary to the desired transparency and simplicity. …”

The then EU Commissioner Michaele Schreyer concluded the debate on behalf of the European Commission and this is what she had to say concerning the tax:

“… Now to the present motion for a resolution on own resources. The subject is becoming increasingly topical because of the question of what is the best way to finance the European budget. On the one hand, of course, we have the following situation: a new decision has been taken on own resources with a new structure, and this own resources decision naturally applies until something else is decided, with everything that goes with it, including the British rebate. That is the law as it stands. So far as the structure of financing is concerned, the Treaty states that the public budget is financed out of own resources. That is what it says in the Treaty. The agreement with Parliament in 1975, for example, also stressed again that they should be genuine own resources. But instead, the de facto trend has been in quite a different direction, and you showed in detail in your report, Mrs Haug, that it has taken a different direction. Regarding the financing that we currently have, I simply have to say that it is not transparent for the citizen. It is one of the most serious points, that hardly any citizen knows how the EU is financed, and what they do not know is all the more unfathomable and leaves room for every kind of speculation. For my own part, I can only say once more that I very much welcome the fact that the Belgian presidency intends taking up this matter of how the EU budget is financed and, Mr Ferber, I consider it to be a subject forming part of the whole issue of the delimitation of competences between the Member States and the European level. That is where it really belongs. I think it is of course also quite important that all who welcome a restructuring on the revenue side should now also find a common vocabulary as soon as possible. If we talk about introducing an EU tax, that sounds like inventing some new kind of tax that the European Union will be entitled to levy. That is not what it is about at all. It is about specifying a tax, some or all of which will flow into the European budget, where responsibility for the amount raised will lie at European level, and it naturally also involves the problems of the European Parliament’s budgetary powers. From my own point of view, I can only stress what Mrs Haug said, that the real issue is: will the European Parliament continue to have these reduced budgetary powers on the revenue side as it does on the expenditure side? I believe an opportunity has presented itself, and we should in my opinion go with the momentum when the Council presidency raises the issue on its own initiative, because if it is not adopted as a topic for Laeken at this point in time, I fear the matter will be buried again and we shall not be able to debate it for a long time. …” The Haug report (A5-0238/2001) on the situation concerning the European Union’s own resources in 2001 was up for vote in the EP Thursday the 5th of July, 2001. There was no RCV at the resolution as a whole but there were three other RCVs of interest. The first was on amendment 3 that proposed to delete point 5 in the report. Point 5 was written as follows: “5. Recalls its view that the “EU must move steadily away from dependence on transfers from Member States” and that “in the long term, the own resources system must be modified with a view to achieving

financial autonomy”5; believes that the purpose of the reform should be to provide the Union with an autonomous source of revenue which is sufficient for its needs and directly linked to the taxpayers;” But amendment 3 was rejected with 141 votes in favour of deletion of paragraph 5 and 356 votes against deletion.13 members abstained. The second RCV of interest was on amendment 6 that was to delete point 11 in the report. Point 11 was written as follows: “11. Supports efforts for a possible introduction of a European tax as a direct revenue which does not lead to additional costs for the taxpayer and could strengthen the link between the Union and its citizens;” Amendment 6 was also rejected with 156 votes in favour of the deletion and 340 votes against with 10 abstentions. However, strangely enough, a vote then followed on essentially the same thing. There was asked a RCV on point 11 itself. And now the result was the opposite. Point 11 was rejected with 195 votes in favour of point 11 and 290 against it with 20 abstentions. This meant that the EP this time rejected the idea about an EU tax as a direct income (the rejected point 11), but in principle, in the long term they want that the Union should achieve financial autonomy. It is interesting to note how the different groups voted at point 11. The EU critical EDD group: 13 against, two abstained. The Liberal ELDR group: Two in favour, 42 against and three abstentions. The Leftist GUE/NGL group: Eight in favour, 23 against and three abstained. The independents NI: Ten against. The Christian Democrats/Conservative PPE-DE: Thirty in favour, 155 against and four abstentions. The Socialist PSE group: 116 in favour, 30 against and two abstentions. The technical independent TDI group: Eight in favour, two against and five abstained. The Liberal/Conservative UEN group: Twelve against and one abstained. The Green/Regionalist Verts/ALE group: 31 in favour and three against. It can be noted that Jean-Marie Le Pen from the French Front National voted in favour of point 11. The Danish Prime minister (since autumn 2011), then MEP, Helle Thorning-Schmidt, abstained. The adopted text from the 5th of July has some interesting parts worth a closer study. Extract from the resolution follow: “European Parliament resolution on the situation concerning the European Union's own resources in 2001 (2001/2019(INI)) 5

EP position on the proposal for a Council decision on the system of the European Union’s own resources (COM(1999) 333), 17 November 1999 (A5-0052/1999), Amendment 6.

The European Parliament, (...) B. whereas appropriations for payments of EUR 92.569 billion were entered in the 2001 budget, of which EUR 90.972 billion has to be raised from own resources, C. whereas own resources are made up of traditional own resources (TOR), the resource accruing from value-added tax (VAT resource) and the GNP, or fourth resource (the application of a rate to the sum of the Member States" GNP), as laid down in Decision 94/728/EC, D. whereas, in the 2001 budget, the GNP resource accounts for the largest share of total Community own resources (47.54%), with the VAT resource accounting for 36.79% and TOR for 15.67%, E. whereas customs duties account for by far the largest share of TOR (86.62%), the remainder being derived from agricultural duties and levies, and sugar and isoglucose levies, F. whereas the own resources share accounted for by TOR has decreased from 29.1% in the 1988 budget to 15.7% in the 2001 budget, the share accounted for by the VAT resource has fallen from 60% to 36.8%, and the GNP resource has become the most important own resource, increasing from 10.9% to 47.5%, G. whereas an estimated EUR 1.597 billion, or 1.73% of the initial 2001 budget, is covered by revenue paid not by the Member States, but directly into the EU budget, representing 0.019% of the Member States" GNP; whereas more than half of this non-own-resources revenue stems from the surplus available from the 2000 budget (EUR 900 million), the other sources being miscellaneous Community taxes, levies and dues (EUR 562.3 million), revenue accruing from the administrative operation of the institutions (EUR 62.0 million), contributions to Community programmes, repayment of expenditure etc. (EUR 45.6 million), borrowing and lending operations (EUR 22.3 million) and miscellaneous revenue (EUR 5.1 million), (...) 2. Notes that own resources constitute 98.3% of revenue for the 2001 EU budget, which means that the resources to be collected by the Member States on behalf of the EU and transferred to it are equivalent to 1.06% of their GNP; 3. Notes that payments under the 2001 EU budget have increased to EUR 93.305 billion (including Supplementary and Amending Budgets 1/2001 and 2/2001), compared to EUR 89.441 billion under the 2000 budget; stresses that this represents 1.09% of the Member States´ GNP in 2001 (January 2001), compared to 1.11% in 2000, confirming the trend for a virtually constant reduction in the share of Community GNP accounted for by the EU budget, which has fallen from 1.20% since 1996; (...) 5. Recalls its view that the “EU must move steadily away from dependence on transfers from Member States” and that “in the long term, the own resources system must be modified with a view to achieving financial autonomy”; believes that the purpose of the reform should be to provide the Union with an autonomous source of revenue which is sufficient for its needs and directly linked to the taxpayers; 6. Takes the view that own resources should be developed in order to be more transparent and visible to citizens;

7. Notes that the GNP resource share has increased steadily and significantly between 1988 and 2001 while TOR and VAT resource shares have decreased over that period; 8. Notes that the effect of the new Decision 2000/597/EC, Euratom will be to heighten this trend further, because of an increase from 10% to 25% in the proportion of TOR to be kept by the Member States, by way of collection costs, and because of the reduction in the maximum call-in rate for the VAT resource, which is currently 1% and has been set at 0.75% for 2002 and 2003 and 0.50% from 2004 onwards; 9. Deplores the fact that the Council has not exploited the opportunity afforded by the adoption of the new Decision to move towards financial autonomy for the European Union and full involvement of Parliament in the budgetary procedure, notably concerning the revenue side; 10. Welcomes the announcement by the Belgian Government that it will propose launching a debate on defining a new budgetary framework over the medium term, during the Belgian Presidency, which could lead to discussions on the desirability of a European tax; 11. Recalls that the new Decision replaces the old European System of Accounts from 1979 (ESA 79) by the new system from 1995 (ESA 95) without changing the amount available under the own resources ceiling; stresses that this will lead to an adjustment to the own resources ceiling percentage, probably reducing it from 1.27% to 1.25%, for which Annexes I and II to the Interinstitutional Agreement of 6 May 1999 (financial perspective and financial framework) will have to be adapted; stresses that this unilateral decision by Council was criticised in Parliament´s position of 17 November 1999; (...)” The Swedish Social Democratic MEP Göran Färm defended his position after the vote and said that it is not a question of giving the right to tax to the European Union. He said that what was proposed was that the Member States agree that each one of them independently introduce such a tax. The taxation would not increase with this. Färm was of the opinion that the EU fees are already financed to a large part by the member states’ budgets and thereby by the tax payers, so this new system would only create clarity and direct control of the EU budget.6

The Scandinavian Social Democrats obviously did not have the same view about EU taxes. Two Danish Social Democrats, Freddy Blak and Torben Lund, delivered a written explanation of their vote: “We have today voted against all calls to introduce a direct EU tax. We do not think that a tax specific to the EU would be a good idea at all. It is very doubtful whether such an EU tax would strengthen people’s attachment to, and enthusiasm for, EU cooperation. Any EU tax would become part of a complex interplay involving national taxes, and there would be cause to fear that it would become difficult for national governments to supervise the combined tax burden. It is therefore impossible to guarantee that the introduction of an EU tax would not involve further burdens for tax payers. The introduction of an EU tax also looks like a step in the direction of a more federal EU, which is something neither we nor the majority of Europeans support.”

Göteborgs-Posten 2001-07-07 "EU-parlamentet sa nej till ny skatt"

Lennart Sacrédeus (Swedish Christian Democrats, PPE-DE group) also stated his opposition towards EU taxation in a written explanation: ”I have voted against the proposal. Sweden’s Christian Democrats do not support items 5 and 11, which propose that the European Union should be given its own powers of taxation. We do not want to increase the number of tax levels in society for our citizens. Swedish tax payers pay tax to the municipality, the county council and the state. Creating another level of taxation, a European one, means an inevitable increase in taxation in the long term. This is a development which we do not want to support. If the EU receives what the report calls ‘financial autonomy’, this will also lead to political autonomy from Member States and their governments, with all the dangers and the lack of control which this brings with it. We do not wish to support such a development.”

THE COUNCIL – MINISTERS OF FINANCE – SAYS NO TO EU TAX – JULY 2001 When Belgium had the Presidency of the Council in the second part of 2001, it supported the idea of a direct tax to the European Union from the citizens. The president of the European Commission, Romano Prodi, also supported the idea. The Belgian minister of Finance, Didier Reynders (French speaking Liberal MR), raised the issue at the Council meeting for Ministers of Finance the 10th of July 2001, but a majority of the ministers were negative to the idea. New taxes were not seen as a positive thing. The finance minister of the Netherlands, Gerrit Zalm (Liberal VVD), said that an 80 year long war had broken out when Spanish rulers wanted to tax Holland. The Irish minister Charlie McCreevy (Fianna Fáil) reminded that the American Revolution started in protest against an American stamp duty. Furthermore the British Chancellor of the Exchequer Gordon Brown (Labour) gave an example when a predecessor was executed in the 14th century when he proposed a property tax. The French minister of Finance, Laurent Fabius (Socialist) said: “I have seen many populous demonstrations outside my office. But yet so far I have not seen any demonstrators that demand an EU tax.”7 The issue was postponed; maybe if the MEPs can arrange demonstrations for the introduction of an EU tax in their respective countries, and put pressure on their minister of Finance, they can get better political results.

Svenska Dagbladet Näringsliv 010711 "Euron utgör startskottet" and "Kritik mot skatteförslag" Mats Hallgren

THE EUROPEAN PARLIAMENT MOVES ONCE AGAIN TOWARDS AN EU TAX – MARCH 2007 On March 29, 2007 the EP voted on the Lamassoure report, which discussed the future of the European Union's own resources (A6-0066/2007). The report was seen as an important step in convincing member states of the necessity of direct income for the EU. Point 29 from the report was essential: “Full respect for the fiscal sovereignty of the Member States 29. Considers that, as stated in the Treaties and in the draft Constitution, fiscal sovereignty will remain with the Member States who might, however, authorise the Union, for a limited period to be revoked at any time, to benefit directly from a certain share of a tax as is the case in most Member States with regional or local authorities;” The debate that took place on the evening of Wednesday, March 28, 2007 showed several different approaches to the issue: several MEPs were very open in their desire for an EU tax, but others were more cautious, using words like “at present.” These same characteristics were seen in the debate on budgetary expansion. The following quotes from the debate might be of interest: Catherine Guy-Quint, French Socialist Party (PSE):

“…To conclude, providing the Union with real resources means increasing Europe's resource autonomy so that it is no longer subject to the blocking power of a given Member State. …”

Gérard Onesta, French Les Verts-Europe-Ecologie (the Verts/ALE):

“...It is true that we would have liked to have found the term 'European tax'. I am sure that we are in the majority, in this House, when we say that we must dare to use this term to replace this covert European tax: a pinch of VAT here, a small contribution there. We should have dared to include the term in this report. Moreover, why talk about a transitional period when we know very well what we should be aiming for? By going all out to cajole some people and to reassure others, we are taking all the strength out of this report, when the starting points were excellent. I should like to make a final point, which is very important for our group: why handicap ourselves before the start of the race by setting the bar at 1.24%? Why this sacred cow before which Parliament, which has always denounced it, is meant to grovel? We know - and we are going to debate this next year, in 2008 - that this bar prevents European policies from being supported with genuine resources. Let us compare what our neighbours are doing: in the United States, they pool 20% of their GNP. …”

Hélène Goudin, Swedish June List (IND/DEM):

“Madam President, the issue of introducing an EU tax has been raised because there are clearly those who believe that the EU has far too little money. There is a desire to solve this state of affairs by allowing the EU to take a tax directly from people's pockets. Paragraph 6 of the report criticises the requirement that all Member States must be agreed where such issues are concerned. It must clearly be made possible to ride rough shod over countries that show reluctance. This is a regrettable position to adopt, especially from a democratic point of view. The June List strongly objects to the EU taking a share of national taxes. The report has been written with a view to taking a further step towards the creation of an EU state with the right of taxation, a common foreign minister, common armed forces and a common currency. This is an awful thought. We have tabled an amendment in which we emphasise the Member States' inviolable right of self-determination within the tax sphere. We believe that all the Member States would need to be in agreement before any form of EU taxation were introduced. This is in line with the views of the people in numerous Member States. We Members of the European Parliament should follow the wishes of our electorate - that is to say respond to the views of our citizens - and act in accordance with these. I thus hope, ladies and gentlemen, that we shall clearly and unambiguously reject this reprehensible report in tomorrow's vote.”

Richard James Ashworth, British Conservative (PPE-DE):

“… in respect of the other traditional own resources, we see no justification for change. We think that a funding system based on a GNI is both logical and fair, and we are happy to support that system. We do not accept, however, that this resource should become a genuine own resource. Quite the contrary. We see merit in a healthy debate between the Member States as paymasters and the Commission as servant. This sends a very clear message to the public that the EU is not a self-sustaining institution but that it is there to help the Member States achieve their mutual goals. …”

Jutta Haug, German SPD, (PSE):

“… Mr Lamassoure has proved this once again now in his charming way with his very moderate proposal for a two-stage reform of the own resources system. We support him in almost every respect, including in his desire not to encroach on national fiscal sovereignty at present by calling for a European tax. …” Comment: Haug obviously has plans for an EU tax in the future.

Valdis Dombrovskis, Latvian New Era (PPE-DE):

“… Although the predominance of GNI own resources ensures that the Member States' liability to pay corresponds to their relative levels of prosperity, nonetheless it makes the funding of the EU budget considerably more difficult. Instead, in order to focus on the priority issues that can be resolved in the European Union, the Member States spend most of their time haggling about their contribution levels. To a large extent, the results of this haggling determine the level of funding of the EU budget, frequently ignoring the undertakings previously made by the Member States themselves. As a result, the EU budget

is growing significantly more slowly than the Member States' budgets, and many important priorities for the European Union as a whole are suffering from insufficient funding. In implementing a reform of the EU own-resources system, it is important to ensure a sufficient annual increase in EU budget revenue. This increase ought to be proportional to the growth in the EU economy, and ought to automatically derive from the structure of the own resources system, instead of being the result of haggling between the Member States. …”

Göran Färm, Swedish Social Democrats, (PSE):

“…We do not, however, wish to give the EU the right of taxation or now to compromise the sovereignty of the Member States on tax matters. For me, what specifically characterises the EU is its being able to combine fundamental national sovereignty with the ability to be able in certain areas to combine forces in order to solve cross-border social problems. To create a genuine EU tax would be to anticipate events. If we are ever to go down that route, conviction as to the advantage of doing so must come from below, that is to say from the citizens and the Member States. We are not at present in that position. …” Comment: Färm obviously has nothing against the introduction of an EU tax, but says he will wait for the citizens to demand it. However, later (in autumn of 2010) he argued publicly in favour of a direct income for the EU. Additional quotes of interest can be found in the explanations given on Thursday, March 29, 2007, the day after the vote:

Françoise Castex, French Socialist Party, (PSE), in writing:

“… The effect of the present system is to make the EU's Budget too dependent on what the nation states want, and I endorse the rapporteur's analysis according to which this system has, over the course of time, become too complex and, above all, unsuited to meeting the new challenges facing the EU, thus making necessary a return to a proper system for own resources as provided for in the EU's founding treaties. …”

Proinsias De Rossa, Irish Labour Party, (PSE), in writing:

“I supported the Lamassoure Report on the future of European Union Own Resources because I believe it is a good contribution to the urgently needed wider debate on EU spending. A budget of 1% of GDP is simply insufficient to meet Europe's political challenges, including the promotion of a strong social and research dimension. A minimum of 3% is required. These issues should be central to the revived efforts to reform the Treaties.”

Olle Schmidt, Swedish Peoples` Party the Liberals (ALDE), in writing:

“I abstained from voting on Mr Lamassoure's report on the future of the European Union's own resources. I agree that the EU's system of income and expenditure needs to be reformed and made

more transparent, but this report goes too far. I maintain that the EU should be funded through membership fees and I do not wish to see any trend towards an EU tax.”

Andrzej Jan Szejna, Polish Democratic Left Alliance - Labour Union (PSE), in writing:

“… The aim of reforming the Community income should be to create real own resources for the European Union. These resources should be based on existing taxes levied in the Member States, which would contribute to the Union's budget. In my view we should also consider the possibility of introducing a real European Union tax.”

The above mentioned point 29 was approved with 509 votes in favour, 114 against, and 15 abstentions. The report as a whole was approved with 458 in favour, 117 against, and 61 abstentions. This pivotal point was strongly supported by Christian Democrats (PPE-DE), Socialists (PSE), Liberals (ALDE) and Greens/Regionalists (Verts/ALE). Two-thirds of the liberal conservative UEN Group (dissolved June 2009) voted against Point 29, while the Left (GUE/NGL), the EU-critical IND/DEM (dissolved July 2009, now mainly in EFD) and the populist xenophobic ITS (dissolved December 2007) groups voted almost entirely against. Among the member state delegations, a majority of Swedes voted against Point 29, as did a majority of Cypriots. Proportionally, many Irish and Polish delegates voted against, while a significant number of no votes also came from the Czechs, the British, the French, and the Italians.

THE LISBON TREATY STRENGTHENS THE EUROPEAN PARLIAMENTS’ DEMAND FOR AN EU TAX – MAY 2009 On May 7, 2009 the drafted Lisbon treaty was up for debate in the EP, and with it, the “own resources” of European Union incomes. Part of the debate included a report on the financial aspects of the Lisbon Treaty (A6-0183/2009) by rapporteur Catherine Guy-Quint, French socialist (PSE). The report was an own initiative: presenting only a political position and not an issue for legislation. Point 2 of the report stated: “Criticises the fact that, as regards the Union's own resources, the Member States have failed to take the opportunity to establish a system of genuine own resources which is fairer, more transparent, more readily understandable to the public and subject to a more democratic decision-making procedure;” Only an RCV regarding the report as a whole was taken, but the principle of an EU tax is one of the fundamental points of the report. The report was approved with 442 votes in favour, 86 against, and 15 abstentions. 193 members were absent from the vote. Votes analysed by EP Political Group: Christian Democratic Group (PPE-DE): enormously in favour, with the exception of the British Conservatives and Czech ODS parties (who left the PPE-DE after the 2009 elections) Socialist Group (PSE): enormously in favour Liberal ALDE Group: enormously in favour Green/Regionalist Group (Verts/ALE): majority in favour UEN Group: divided equally in favour and against (UEN dissolved after the 2009 elections) Non-inscrits (NI): majority against Leftist GUE/NGL Group: enormously against EU critical IND/DEM Group: enormously against (IND/DEM was dissolved after the 2009 elections) By country, resistance to the EU tax came from many MEPs in the United Kingdom, Poland, the Czech Republic, Sweden, and the Netherlands. The vast majority of MEPs have a federalist view of EU development. In their view, obtaining independent incomes for the European Union is a decisive step towards creating the United States of Europe.

Some MEPs voted in favour of the report (and, therefore, in favour of an EU tax) but attempted to excuse themselves. The five Swedish Moderates in PPE-DE wrote the following explanation of vote in May 2009: “We have voted in favour of the report on the financial aspects of the Treaty of Lisbon, which deals with the form the budget procedure will take if the Treaty of Lisbon enters into force. We do not support the parts of the report that deal with the EU having its own resources through power of taxation. We also oppose the establishment of flexibility mechanisms”. Unfortunately, these Swedish Moderates did not dare to go against the Guy-Quint report, even though it included the demand for an EU tax. Two other MEPs, Martin Callanan (British Conservative) and Nils Lundgren (Swedish EU-critical June List), sent in written explanations of votes that went against the Guy-Quint report as a whole. And again it happened, just after the EP’s approval of a text that calls for the establishment of a system of genuine own resources, there are elections to the EP. However, the issue of introducing an EU tax was not up for debate in any of them. The idea of creating a federal European state does resonate with voters, so it is better for the federalists to keep quiet about it.

THE EUROPEAN PARLIAMENT TAKES UP THE EU TAX DEMAND IN CONNECTION WITH THE 2011 BUDGET OCTOBER 2010 On Wednesday October 20, 2010 the Parliament's position on the 2011 draft budget as modified by the Council was also approved (the Jedrzejewska/Trupel report - A7-0284/2010). An amendment tabled by S&D (number 18) was approved by a show of hands, with a huge majority of PPE-DE, S&D and ALDE in favour. This amendment (which became point 7 in the adopted text) states: “Reminds both the Council and the Commission, moreover, of its resolution of 29 March 2007 on the future of the European Union's own resources in which Parliament underlined that the current system of EU own resources - where 70% of the Union's revenue comes directly from national budgets - results in the contribution to the European Union being perceived as an additional burden on national budgets; is deeply convinced that all EU institutions should agree on a clear and binding timetable in order to agree on a new system of own resources before the entry into force of the next post-2013 MFF; expresses its willingness to explore all possible avenues in that respect;” Part of the amendment, however, was singled out for a separate vote. It read: “including a financial transaction tax”. This text was voted down in an electronic vote: 304 for, 361 against, and 13 abstentions. Individual votes were not registered, but it is likely that the PPE-DE and ALDE went against this proposal from the S&D. Several interesting explanations of votes were recorded: Four Swedish Social Democrats wrote that they had voted in favour of an inquiry about the system of own resources, including a financial transaction tax. They also wrote that such a tax must be budget neutral and respect the member states' competence with respect to taxation. In connection with the 2011 EU budget vote, MEP Raül Romeva i Rueda (Spanish Initiative for Catalonia Greens, Verts/ALE) wrote honestly:

“This year's budget debate again underlines the need to agree a meaningful system of own resources for the EU. The annual squabbling over the budgets between the European institutions leads to chaotic decision-making and creates an acrimonious diversion, which could be so easily avoided through an own resources system, such as allocating part of the revenue from an EU financial transaction tax, a tax on aviation fuel or a carbon tax to fund the EU budget. Despite this, today's vote broadly strikes a balance between responding to the extra demands created by the Lisbon Treaty, whilst limiting the growth in the EU budgets, in response to current budgetary difficulties”.

The “squabbling” Romeva i Rueda refer to is merely the reluctance of member states to fund the MEPs’ yearly wish list of expenses.

THE ALDE GROUP POSITION PAPER PRESENTED IN JANUARY 2011 In January 2011, the ALDE Group presented its position paper on the 2013 budget. The group states that, in its view, the EU budget must increase in the long run in order to live up to commitments made in the Treaty of Lisbon. As committed European Federalists, members of the ALDE are opposed to accounting of the EU budget by individual member states. This analysis allows member states to determine whether they are net receivers or net contributors, something that goes against the ALDE vision of the EU as a single entity. The classic example of budgetary tensions in the EU is the Common Agriculture Policy which draws complaints from member states who are not “getting their money's worth”. ALDE wants to increase own resources in the EU budget and welcomes the Commission's initiative to investigate possibilities for new own resources (the EU tax). ALDE believes that own resources should replace national contributions to the EU budget in the long run. This would make the European Union totally independent of the member states, making it difficult for citizens (or member states) to correct EU policies that are functioning poorly. Expense scandals in the EP – as well as in the Committee of Regions – highlight the inability of EU institutions to police themselves. Without oversight by national governments, special interest groups (like the agricultural and fishery lobbies) will increase their foothold within the EP, ensuring that EU funds will be misused to an even greater degree.

EUROPEAN PARLIAMENT REGARDING INNOVATIVE FINANCING AT THE EUROPEAN AND GLOBAL LEVELS – TOBIN TAX CAN BE ONE WAY IN GETTING AN EU TAX – MARCH 2011 On Tuesday March 8th, 2011 the EP voted on the Podimata report (A7-0036/2011) regarding innovative financing at the European and global levels. The report was an EP “own initiative”: a purely political statement aimed at impacting the public debate. Point 29 of the report clearly shows that the EP is desperate to expand the EU budget to finance inefficient projects like the Common Agriculture Policy and create other lavish wastes of citizens’ funds: “… notes the Commission's aim to increase the volume of the EU budget through the use of innovative financial instruments; is convinced that in order to safeguard the European added value of the aforementioned innovative financing tools a part of those revenues could be allocated to finance EU projects and policies; recalls that the Commission's recent Communication on a review of the EU budget regards EU taxation of the financial sector as a possible source of own resources; calls for a broad debate involving the EU institutions, national parliaments, EU stakeholders and civil society representatives on the choices available regarding those policies, the shares of revenue to be allocated at EU and national level and the various ways of achieving this; …” A Tobin tax 8 has got some support in most progressive movements. It might be one of the few ideas of taxation that can muster some support among people in the European Union. It is odd, though, that so many center-right governments in the Union support this tax, because it is not really consistent with the “business friendly” profile. Most important of all, those who support a Tobin tax must ask themselves if they really want to support a direct tax for the EU treasury. The Podimata report was approved with 529 votes in favour, 127 votes against, and 18 abstentions. The no votes came primarily from the conservative ECR Group, the EU critics in the EFD Group, the Left in GUE/NGL, around 20 ALDE Group members, and the independents. After this resolution in March, 2011, the EP occasionally returns to the need of an EU tax in their resolutions. Previously, the need for a European Constitution and later the need for the Lisbon Treaty to be approved were returning themes in the political statements from the EP.

A Tobin tax, suggested in 1972 by the Nobel prize winner economist James Tobin, was originally defined as a tax on all spot conversions of one currency into another. The tax is intended to put a penalty on short-term financial round-trip excursions into another currency. 8

THE EUROPEAN COMMISSION TABLES THEIR PROPOSAL FOR AN EU TAX – JUNE 2011 The European Commission explored the idea of taxing the financial sector at the EU level for several months. On 29 June, 2011, the Commission announced, in the context of the multiannual financial framework, that it would propose to set up a financial transaction tax as an own resource for the EU budget. The Commission tabled its proposal (COM(2011)510) for a Council decision on the system of own resources of the European Union. The Commission also stated that it has explored ways to introduce a financial transaction tax at global level since 2009 with its international partners in the G20 (Pittsburgh, Toronto) and they have said that they will continue to do so. Politically interesting extracts from the Commission proposal are as follows:

Extract from the introduction: “The report on the operation of the own resources system 9 demonstrates that the current financing system performs poorly with regard to most assessment criteria. The financing system is opaque and so complex that only a handful of specialists fully understand how it works. This limits democratic oversight of the system. Moreover, many Member States perceive the system to be unfair. Large contributors to the budget consider that their net contributions are too high, whereas a number of Member States benefitting from redistributive policies, such as cohesion, face increased contributions to the EU budget to finance correction mechanisms.” “More importantly perhaps, the way the EU budget is financed – with contributions from Member States to the EU being seen solely as expenditures by many national politicians – inevitably creates a tension which poisons every debate about the EU Budget. The progressive development of correction mechanisms is just one symptom of this problem. The pressure to pre-determine national allocations is another. The increasing focus on a narrow accounting approach with the main objective of maximising returns not only colours public debates about the value of EU spending. It also leads some people to question the benefits of EU membership itself.”

The Commission’s arguments for the proposal: 9

Commission Staff Working Paper "Financing the EU budget: Report on the operation of the own resources system", SEC(2011) 876 final of 29.06.2011

“2. THREE PROPOSALS – ONE DECISION The proposed own resources Decision includes three main elements: the simplification of Member States' contributions, the introduction of new own resources and the reform of correction mechanisms. The Commission report on the operation of the own resources system highlights how each of these proposals relates to- and complement the others. Taken together these proposals constitute a balanced package which must be looked at as a whole in the context of a single decision.

“2.1. Simplifying Member States' contributions The Commission proposes that the VAT-based own resource be eliminated in parallel with the introduction of new own resources. This is in line with the views expressed by most Member States and the EU institutions in the consultations linked to the Budget Review. “The existing VAT-based own resource is complex, requires much administrative work to arrive at a harmonized base, and offers little or no added value compared to the GNI-based own resource. Its removal will considerably simplify the national contributions and reduce the administrative burden for both the Commission and Member States. “Considering the administrative complexities related to this own resource and the low call rates currently in place, phasing it out step-by-step would be less efficient than a fully-fledged elimination on a given date. It is therefore proposed to abolish this resource on 31 December 2013. Should the Decision enter into force at a later date, this provision will be enacted on retroactive basis, following a common practice in past revisions of the own resources decisions. Using 31 December as an end point will avoid calculating the resource for a fraction of a given year. “Following the ending of the VAT-based own resource, further activity will be required: managing the annual VAT statements for the year preceding the ending of the resource, undertaking the annual VAT balance exercise, making controls to give assurance on the accuracy of the calculations, completing the supervision cycle, managing outstanding reservations, infringements, corrections and accounting reconciliations. Final extinction of all VAT-based own resource related activities will take several years.

“2.2. Introducing new own resources The Commission identified six potential candidates as own resources in the EU Budget Review. These were subject to a thorough analysis, particularly featuring the assessment criteria set out in the Budget Review. “This analysis highlighted the following key elements: “(1) Financial transaction taxation (FTT) could constitute a new revenue stream, which could reduce the existing Member State contributions, give national governments extra room for manoeuvre and contribute to the general budgetary consolidation effort. Although some form of financial transaction taxation already exists in a limited number of Member States, the analysis also made it clear that action at EU level could prove both more effective and efficient than uncoordinated action by Member States given the level of cross-border activity and high mobility of the tax bases. Furthermore, it could play a role in reducing the existing fragmentation of the Internal market. The Commission will therefore present a proposal for an EU financial transaction tax in the autumn of 2011. A financial transaction tax

that could be collected at EU level would reduce the juste retour problems observed in the current system. The EU initiative will constitute a first step towards the application of a FTT at global level. “(2) The development of a new VAT resource would bring a new impetus to the development of the Internal market by reinforcing harmonization of national VAT systems. The new VAT resource would be one facet of a markedly revised VAT system in the EU in the wake of the Green Paper on the future of VAT. The new initiative will include the elimination of a number of exemptions or exceptions which are detrimental to the proper functioning of the Internal market and the measures to reduce VAT fraud in the EU. “(3) The analysis showed that these own resources could be introduced at EU level during the 20142020 period following a suitable period of technical preparation. Combining these own resources would bring additional advantages compared to introducing only one new own resource. It would ensure a fair distribution of impact across the various Member States and the critical mass necessary to substantially reduce the existing Member States contributions to the EU budget. “On the basis of its analysis, the Commission proposes the introduction of a financial transaction tax own resource from 1 January 2018 at the latest and a new VAT resource from 1 January 2018 at the latest. The timing of introduction of these new own resources reflects the time needed for completing the legal framework, and adopting and implementing the relevant legislation. The Commission will present the relevant detailed regulations or amendments to existing legal acts as well as the related implementing regulations pursuant to Article 322(2) TFEU by the end of 2011.”

At page 5 in the proposal there is an interesting table as follows:

Estimated evolution of the structure of EU financing (2012-2020) Draft budget 2012 EUR billion

% of own

2020 EUR billion

resources

% of own resources

Traditional own resources

19,3

14,7

30,7

18,9

Existing national contributions

111,8

85,3

65,6

40,3

VAT-based own resource

14,5

11,1

GNI-based own resource

97,3

74,2

65,6

40,3

66,3

40,8

of which

New own resources

of which New VAT resource

29,4

18,1

EU financial transaction tax

37,0

22,7

131,1

100

162,7

100

Total own resources

The Commission proposal also deals with the correction mechanism and the need to reform this. It is a little bit off topic for this report, but the following might be of interest for many: “The 1984 Fontainebleau European Council set out important guiding principles to ensure fairness in the EU budget. It indicated in particular that ‘expenditure policy is ultimately the essential means of resolving the question of budgetary imbalances’. It acknowledged, nevertheless, that ‘any member State sustaining a budgetary burden which is excessive in relation to its relative prosperity may benefit from a correction at the appropriate time’. “These principles have been confirmed and consistently applied in successive own resources decisions. Today, temporary mechanisms of correction are granted to four Member States but they will end in 2013. The correction granted to the United Kingdom (UK) and rebates on its financing for four Member States (Germany, the Netherlands, Austria and Sweden), as well as the hidden correction consisting in the retention, by way of collection costs, of 25% of the amounts collected by the Member States for traditional own resources, will continue to apply until a new own resources Decision enters into force. In the context of this in-depth revision of the EU financing, a fresh look at these correction mechanisms is necessary.”

The Commission proposal on this matter: “This Decision therefore proposes the inclusion of temporary corrections in favour of Germany the Netherlands, Sweden and the United Kingdom from 2014. These corrections must reflect, inter alia, the important developments in the financing of the EU set out in this Decision, the evolution of expenditure proposed in the financial framework including the completion of the phasing-in of expenditure in those Member States which acceded to the EU in 2004 and 2007, and the high level of prosperity achieved by the above-mentioned Member States.” Article 2 (Categories of own resources) of the proposal for decision: “1. Revenue from the following shall constitute own resources entered in the budget of the Union: (a) traditional own resources consisting of levies, premiums, additional or compensatory amounts, additional amounts or factors, Common Customs Tariff duties and other duties established or to be established by the institutions of the Union in respect of trade with non-member countries, customs duties on products under the expired Treaty establishing the European Coal and Steel Community as well as contributions and other duties provided for within the framework of the common organisation of the markets in sugar; (b) a financial transaction tax in accordance with [legislative act] (EU) No […/…], with the applicable tax rates not exceeding …%.

(c) a share of the Value Added Tax (VAT) on supplies of goods and services, intraCommunity acquisitions of goods and importation of goods subject to a standard rate of VAT in every Member State pursuant to Council Directive 2006/112/EC18, with the rate applicable in accordance with Regulation (EU) No …/… not exceeding two percentage points of the standard rate. (d) the application of a uniform rate, to be determined pursuant to the budgetary procedure in the light of the total of all other revenue, to the sum of Gross National Income (GNI) of all the Member States.” As for the new VAT resource in point 1c, an email question to the Commission about the practicalities of it was answered with the promise of additional details in the future. In the Commission table above it can be noted that the total own resources are estimated to increase from 131,1 billion euro in the draft budget 2012 to 162,7 billion euro in 2020. That is a 24,1% increase, but by year that would be an increase of a little bit less than 3% annually. That is not too bad, taking into consideration the austerity program that nearly all Member State budgets are currently going through.

COMMENTS ABOUT THE COMMISSION PROPOSAL FOR AN EU FINANCIAL TRANSACTION TAX (FTT) I do not have an opinion on whether or not a FTT is a good thing in principle. The debate on if it should be a global tax or if a European Union only tax would be acceptable is not discussed here, either. The more interesting debate is how and where the FTT income should be used. I do not think introducing a new tax is worth the effort if it will be used for an EU budget known for waste in areas such as the Common Agricultural Policy, the Common Fishery Policy, the European External Action Service, not to mention unnecessary EU institutions like the Committee of the Regions and European Economic and Social Committee. Add also the waste of money in the EU budget because of the EP commutes in between Brussels and Strasbourg. Cutbacks are necessary and urgent in the EU budget. Every wasted euro in the EU budget is a theft from the taxpayers. That is why the European Union does not deserve to get more tax money. Furthermore, The European Commission and the EP are always eager to spend more money but are held back by the Member States. With their own tax resource the Commission and the EP will increase the taxes year by year. And they will get away with it. So far they have been able to hide the fact that they want an EU tax from being debated in the election campaigns to the EP every fifth year. Will the FTT be tax neutral? It is quite possible that the increased costs for the finance institutions will in the end be paid by the citizens in the form of higher bank fees. The Telegraph reported the 8th of November 2011 that during talks in Brussels the British Chancellor George Osborne rebuked the European Commission and member states who support the introduction of an EU-wide Financial Transaction Tax. Osborne argued, “What I find difficult to accept is that we are

going to spend a huge amount of time discussing [the FTT] in the middle of a crisis in the European economy…when it is already clear, both from the euro and non-eurozone, that there is not anything like unanimity for it.” He also argued that the burden of the tax would fall not on banks but on pensioners, and that according to the Commission’s own research, an EU-wide FTT could reduce the EU’s GDP by up to 3.5%, and lead to the loss of half a million jobs around Europe. However, at the same time German Finance Minister Wolfgang Schäuble said, “We will wait 20 years

before doing anything if we wait for the last island on this planet…We may have to do it in the eurozone rather than the EU.” The arguments in favour of an EU FTT must also be described. The Commission uses the rate of 0.1% for bonds and shares and 0.01% for derivatives in their calculations. It is argued from their side that this is such a minor percentage that it will not lead to finance institutions moving out from the Union.

The federalist MEPs now acts as ambassadors for the EU institutions and tries to convince their sceptic national political parties, their governments, their national and regional MPs and so on. It does not work the other way around that MEPs listen to their constituents and scrap an idea from the EP that does not have any supporters.

Two faithful foot soldiers for the EP federalists, MEPs GĂśran FĂ¤rm and Olle Ludvigsson (Swedish Social Democrats, S&D), have written in Swedish press and in the Financial Times that by making purely speculative high-frequency practices less profitable, the tax could promote stability through a reduction in market volatility and a price formation mechanism more strongly focused on long-term fundamentals. In addition, if differentiated across trading vehicles, the tax could boost stability by creating incentives for financial actors to move over-the-counter transactions to transparent and wellregulated venues. Also, the Socialist MEPs claims that the finance sector is largely exempted from VAT and its business conditions are disproportionately favourable from a taxation point of view in relation to other sectors. The Socialist MEPs also argues that the total proposal will mute the GDP growth around 0,5 percent, but there are other positive GDP outputs that these tax incomes will give in EU investments. The revenues could be very valuable if used in a clearly specified manner by facilitating important interventions in crucial policy areas, according to FĂ¤rm and Ludvigsson. What the FTT incomes will be used for in the EU budget the Swedish MEPs does not mention, well aware that the Common Agricultural Policy is not popular among people in Sweden. They claim though that the membership fees to EU will be reduced with equal amount to what the FTT will give in incomes to the EU institutions. Furthermore the two Socialist MEPs state that the primary market operations with shares and bonds when they are first offered at the market will be exempted from the FTT. The obligation to be taxed will also depend on where the involved finance actors are located, not where the transaction is done. Finance institutions within the EU countries therefore can not avoid the taxation by doing trade outside the EU area. However, the finance institutions might move this sort of activity to companies outside EU so this last mentioned argument can be eliminated.

COMMENTS ABOUT THE COMMISSION PROPOSAL FOR A NEW VAT RESOURCE There exists already a VAT-based contribution from member states to the EU budget, but the Commission proposes that this system would be replaced by a single EU VAT rate. It is still the national tax authorities that raise the money, the Commission will not raise the tax directly. The money will then be transferred to the EU budget. The positive thing is that the complex formula currently required to generate a theoretical EU VAT tax base would be replaced by a genuine EU-wide tax base. But of course this will facilitate raising the VAT in the future in order to increase the incomes to the EU budget. There must be better ways to simplify the VAT-based contribution. This net VAT resource will be constructed in a way that benefits the EU institutions’ possibility to milk it in the future. The new EU VAT rate would apply to all goods subject to national standard rates but exclude goods and services subject to zero or reduced rates (different member states currently apply zero or reduced rates to various individual products and services due to VAT’s regressive nature). By applying a 1% rate to this “narrow base”, the Commission expects to raise €20.9bn a year, but if the base were expanded through greater harmonisation of member states’ rates (and fewer reduced rates), this would increase, with an estimate of €50.4bn under “full harmonisation”.10 With reference to the Commission’s 2010 Green Paper on overhauling the existing VAT legislation, the Commission wants to harmonize and get a greater standardisation of rates and fewer reduced rates all over the European Union and its member states.11 This will limit the independence of the member states to decide on their own policy for VAT. For example, some countries have lower VAT at books or goods that families with children are supposed to be in strong need of.

10 11

Open Europe: “Ten ways to introduce an EU tax (and why none of them will work)” August 2011 European Commission, ‘Commission staff working document accompanying Green Paper on the

future of VAT’, December 2010, pages 64–65

FRANCE AND GERMANY PROPOSES AN EU TAX – AUGUST 2011 As the euro crisis got more serious several sorts of meetings between top politicians has been arranged one after the other during 2011. The 16th of August German Chancellor Angela Merkel and French president Nicolas Sarkozy met. They had to restore trust in the euro and the economies of the 17 euro countries. Merkel and Sarkozy were under pressure to convince markets that the euro zone was sound. They proposed a package of several measures for “a real economic government” for the euro zone. For example, euro zone national governments should enshrine deficit-limiting rules into their constitution respectively, and this would be obligatory, not optional. But, also a FTT should be introduced, proposed Merkel and Sarkozy. Surprising in perspective that Merkel at a press conference in Brussels on the 2nd of November 2010 said that she was against the introduction of an EU tax. But the French-German proposal was “fluffy” and there were several question marks. Should it only be introduced in the 17 euro countries? Germanys finance minister Schäuble said that this could be the case, but the Dutch government said no to that. Were the incomes going to the 17 euro zone countries that are in need of strengthening their national budgets? Or if all 27 EU Member States are in on it, should the tax incomes be distributed to all the national budgets? Or is still the main idea that this FTT in German-French edition should go to the EU budget? Well, all this was probably open for discussions with the EU president van Rompuy and the President of the Commission Barroso. A more concrete proposal was going to be presented in September.

THE SITUATION AT PRESENT The different ways to introduce an EU tax we will not go deeper into. But for further studies Open Europes booklet from August 2011 “Ten ways to introduce an EU tax (and why none of them will work)” is recommended.12 The Commission persists Wednesday the 28th of September 2011 in Strasbourg the EP debated the “State of the Union”. The president of the Commission, José Manuel Barroso, delivered a speech in which the peak was the FTT. He said as follows:

“ … The Commission will deliver the remaining proposals by the end of this year, namely rules on credit rating agencies, bank resolution and personal responsibility of financial operatives. So we will be the first constituency in the G20 to have delivered on our commitment to global efforts for financial regulation. In the last three years, Member States – I should say taxpayers – have granted aid and provided guarantees of EUR 4.6 trillion to the financial sector. It is time for the financial sector to make a contribution back to society. (Applause) That is why I am very proud to say that today the Commission adopted a proposal for the Financial Transaction Tax. (Applause) Today I am putting before you a very important text that if implemented may generate revenue of about EUR 55 billion per year. Some people will ask ‘Why?’. Why? It is a question of fairness. If our farmers, if our workers, if all the sectors of the economy, from industry to agriculture to services, pay a contribution to society, the banking sector should also give a contribution to society. …” It is interesting to notice that in the Commission’s proposal in June 2011 they calculated an income of 37 billion euros of the FTT, but in September Barroso increased that income to 55 billion euros. Which one is the correct figure?

In the press release from the Commission they stated as follows: “The financial sector was a major cause of the crisis and received substantial government support over the past few years. To ensure that the sector makes a fair contribution to public finances and for the benefit of citizens, enterprises and Member States, the European Commission on 28 September put forward a proposal for a financial transaction tax (FTT).

http://www.openeurope.org.uk/research/teneutax.pdf

The Financial Transaction Tax (FTT) Through the FTT, the financial sector will properly participate in the cost of re-building Europe's economies and bolstering public finances. The proposed tax will generate significant revenues and help to ensure greater stability of financial markets, without posing undue risk to EU competitiveness.”

The new elected Danish government says no to an FTT only for the EU A new elected Danish government consisting of the Social Democrats, the social liberal Radikale Venstre and the leftist Socialistisk Folkeparti stated in the end of October 2011 that they only support an FTT if it is global. They do not support an FTT if it is only for the European Union or for a part of it.13

The Swedish Parliaments’ European Committee says no to FTT The European Committee in the Swedish Parliament discussed an FTT Friday 30th of September 2011. The four conservative and liberal parties in government say no to an FTT and have support from the xenophobic Sweden Democrats. The Social Democrats, the Left Party and the Greens are positive to an FTT but they do not accept that it will give incomes directly to the EU cash box. The opposition are not in favour of giving the European Union the right to tax.

Will it be possible for Member States to veto the FTT? During a private breakfast at the British Conservative Party conference in Manchester in the end of October 2011 Dr. Kay Swinburne, MEP and spokesman for Europe's economic and monetary affairs committee, told a group of regulators that Britain was wrong to "relax" and rely on its veto to block the controversial tax. MEP Swinburne said that a group led by the EU tax commissioner Algirdas Semeta, had "already started work" on presenting FTT as a valued added tax (VAT) – which could be imposed without being ratified by a vote and therefore strip Britain of its right to veto. Under EU rules, new taxes have to be agreed unanimously by all members but VAT can become law with a simple majority. Well, if this is a possible way for the Commission to run over those Member States that have already clearly stated that they will veto the EU tax, remains to be seen.

The G20 meeting in Cannes – November 2011 The Leaders of the G20, met in Cannes, France, on 3-4 November 2011. A global FTT was discussed, but in the Communique from the meeting in the end of paragraph 28 only the following could be read about it: 13

Sources: http://www.notat.dk/regeringspartier-i-storslalom-om-eu-skat-p-transaktioner/ and http://www.afrika.dk/regeringen-spænder-ben-international-robin-hood-skat

“… We acknowledge the initiatives in some of our countries to tax the financial sector for various purposes, including a financial transaction tax, inter alia to support development.”14 So if the European Union would like to introduce an FTT they have to do it alone.

A Danish study – FTT will cost a considerable sum for each Dane CEPOS, the Danish Centre for Political Studies, is an independent research institution which works as a classical liberal/free-market conservative think-tank in Denmark. In December 2011 CEPOS presented a study that concluded that the FTT will cost each Dane 1 525 Danish Crowns (krone) in extra tax burden and 1740 Danish Crowns in lost social security. (1 euro is around 7,5 Danish Crowns.) CEPOS study argues that the burden of the tax will not be carried by the financial institutions but of their customers, especially those that save up for their pension. And the loss of social security affects all in the society. The tax on the financial sector will finally and last be paid by the customers and therefore hurt both activities and citizens, as will the FTT result in lost interest to invest and produce and that will lead to lost social security. The losers with an FTT are those activities and citizens that will borrow money for investments or save up to their pension. The FTT will result in fewer investments in among other things new technology, which at the end will result in lower wages for the employees. And the average wage earner can also expect to receive a lower finance yield from his or her pension savings when the pension funds must pay a tax on their investments. The result of the FTT will therefore, according to CEPOS, result in an increased tax burden at the Danes of 1525 Danish Crowns per person and a lost social security of around 1740 Danish Crowns per person. According to CEPOS also the proposal of FTT costs 1,14 Danish Crown in lost economic social security for each Danish Crown that is taken in by the tax. In conclusion, according to CEPOS an FTT at financial transactions is bad and will only reduce willingness to invest and lower the productivity, the growth and the social security in Denmark. They also do not think that the FTT can put up obstacles against finance crisis. The latest finance crisis had for example nothing to do with financial speculations and should have occurred also with an FTT introduced. The advantage of the FTT, according to CEPOS, is that it is not that visible. Therefore it is very likely that it will cause more harm than utility.

French president tries to set an example for an introduction of the FTT In the beginning of January 2012 there came signals from France that “a decision on the taxation of financial transactions in France will be taken before the end of January” to “set the example” in Europe. But Germany’s position remained unchanged. Their aim was to introduce a financial transactions tax in the EU. 14

Source: http://www.g20.utoronto.ca/2011/2011-cannes-communique-111104-en.html

During his visit to Paris in the beginning of January the Italian Prime Minister Mario Monti insisted that Italy is now open to the idea of an EU-wide financial transactions tax, but warned that “it is necessary that individual European countries do not go it alone”. British Prime Minister David Cameron stated the 8th of January that he would veto a European-wide FTT unless it was adopted globally. But the same day the European Commission said that it may push for a tax among a smaller group of members if agreement by all 27 proved impossible. This would be via an “enhanced co-operation” procedure, which requires a minimum of nine countries to agree. The day after, Monday the 9th, Angela Merkel said at a press conference that she supports the FTT tax and wanted that a proposal should be tabled at the EU Summit in March. But she faced opposition within her own government. Senior politicians from Angela Merkel’s junior coalition partner, the Liberal party FDP, criticised the possibility of a eurozone-only Financial Transactions Tax. FDP leader and viceChancellor Philip Rösler said: “I remain convinced that such a tax must apply to all EU countries, not only for the euro countries”, while the FDP party’s general secretary, Patrik Döring, warned that it would “distort competition”. In the middle of January the new elected Spanish Prime Minister Mariano Rajoy (from the Conservative Partido Popular) announced that he backed French President Nicolas Sarkozy’s proposal to introduce a tax on financial transactions.

Yet a report that warns for increased costs with FTT – January 2012 In the middle of January yet an analysis was released, this time by the Global Financial Markets Association (GFMA), showing that an EU-wide financial transaction tax would make foreign exchange trades between seven and 18 times more costly. It must however be pointed out that this is a leading financial services sector group and that they have their own special interests to defend. GFMA said the proposed European financial transaction tax (FTT) would make all FX trades up to seven times more expensive, and more liquid products up to 18 times more costly. The report – which came as hedge funds led another attack on the tax – warned that extra costs will be passed on to “endusers” such as pension funds, insurers and corporates, thereby damaging the real economy. As well as undermining the EU’s single market, the FTT would be likely to reduce EU taxpayers’ savings and pensioners’ incomes, lead to a reduction in the level of investment in the real economy, send asset prices lower, widen spreads, hinder efficient price discovery and increase market volatility.

EU member states that do not accept the FTT will nevertheless be affected says the European Commission – January 2012 The European Commission put in a higher gear in its fight for an FTT. The 23rd of January, Emer Traynor, spokesperson for EU Tax Commissioner Algirdas Semeta, at a press briefing said that Swedish and British banks will be partly taxed by an FTT even if Sweden and United Kingdom chooses to not take part. If the transaction tax went ahead, operations handled by banks from EU member states that has not introduced the FTT, would be covered as long as the buyer or seller in the transaction have links to the eurozone, the European Commission official Emer Traynor explained. It there is a link to a financial institution in an EU member state that has introduced the FTT and the transaction has been done in London, the transaction will be taxed anyway.

Traynor said opting out of the scheme would be the worst-case scenario for Britain, as its financial sector would be hit by the tax – at least partially – but authorities in London would get none of the revenue. “It would be in (Britains) interest to be in” because its banks “would have to give up (their) European client base to avoid the tax,” said Emer Traynor. United Kingdom has stated that this judicial construction might be illegal, but the legal experts of the Commission persists that it is a legal construction. Traynor also said: “Our figures show that there would be a very small impact of the financial-transactions tax on growth and the economy”. So it is word against word about the impact of the FTT. At about the same time the EU Tax Commissioner Algirdas Semeta told the Financial Times that; “The UK would lose a lot if other [EU] members decide to move ahead with a financial transactions tax. Because of its design, [Britain] will be subject to the tax, but at the same time, it will not receive any money from it.” Financial Times notes that the FTT could use the ‘residence principle’, and therefore cover any trade made by a firm which is based in the tax area, even if the trade takes place in London or other financial centres outside of the EU. Meanwhile, after German Economy Minister Phillip Rösler (FDP) floated the idea of introducing a European ‘bourse tax’ instead of an EU-wide FTT. But Open Europe’s Head of Economic Research Raoul Ruparel said to Daily Telegraph 21st of January that; “If it is imposed only on shares this bourse tax may not have such a big impact but if it covers, say, derivatives, then it would have a disproportionate effect on the UK because of the size of the City. The FTT is never going to work in the UK and this doesn't seem on the surface that much different: a similar proposition but in another wrapper.” Furthermore, Monday the 23rd of January EU Internal Market Commissioner Michel Barnier held a speech in the City in London. Barnier then insisted that a European financial transaction tax “will not be imposed on the UK against its will,” but he confirmed that the tax “would be levied on the parties to the transaction, at their domicile. Regardless of whether the transaction is carried out in London, Paris, Frankfurt, Amsterdam or anywhere else.” Mr Barnier claimed “there is no plot in Europe to undermine the City”. Instead, he insisted that the UK's place was “at the heart of Europe” and that the City must learn to “play the European game” and give up seeking UK exemptions that threaten to endanger open trade. Barnier also openly criticised the efforts of David Cameron to safeguard the UK’s financial sector as a national champion, saying “we need to turn our back on nationalism and protectionism” as it “would spell the end of the single market”, But when the Frenchman Barnier was challenged on why subsidies given to the French-led agriculture industry had not prompted a similar tax, he responded by saying: “Even in Britain you have to eat.” He also said, “The reach of the UK doesn't stop at the Channel Tunnel,” he warned, saying that the single market needed a single rule book. Separately, Barnier also suggested that he is considering stricter EU rules on bankers’ pay in order to avoid a “violent reaction” from increasingly resentful European voters. He explained, “Among the ideas that we are exploring is a ratio between fixed salary and bonus…Another idea which could be considered is a ratio between the lowest level of pay in a bank and the highest level of pay.” Well, out of Barnier’s speech it can be concluded that the European Commission is determined to increase its power in this area of policy.

Borg and Cameron hit back Very few national politicians dare to go in clinch with the Commission. The Swedish Minister of Finance, Anders Borg, made a statement against the FTT the 24th of January. He said that Sweden would actually lose tax incomes if Sweden would introduce an FTT, this because of negative growth effects and the high level of tax in Sweden. Then also a lot of this tax income would go to the European Commission. The economic growth will be hurt on the whole EU area when the cost to borrow will increase in less liquid areas. Borg is of the opinion that the Commission calculations about the negative impacts were too moderate. He also said that if the FTT is introduced, there is a considerable danger that activities move out of the euro area to Stockholm or London. It remains to be seen though depending on how the proposal will be shaped. But there is also a danger that it benefits USA or Singapore, said Borg. At the World Economic Forum in Davos, Switzerland, UK Prime Minister David Cameron went to attack as he branded the eurozone as uncompetitive and called the plan for transaction tax "madness". The British premier took the stage on the second day of the World Economic Forum in Davos, the annual Alpine get-together for the global business elite, and revived his simmering feud with the ailing single-currency bloc. Cameron dismissed the French-led plans to introduce a tax on all financial trades and said; “Even to be considering this at a time when we are struggling to get our economies growing is quite simply madness.” Cameron said that it's right that the financial sector should pay their share and that in the UK they are doing exactly that through our bank levies and stamp duty on shares. And these are options which other countries can adopt, said Cameron. He added; “… look at the European Commission's own original analysis. That showed a financial transactions tax could reduce the GDP of the EU by 200 billion euros, cost nearly 500,000 jobs and force as much as 90 percent of some markets away from the EU.” The European Commission responded to Cameron's figures, with spokesperson for taxation affairs Emer Traynor saying that the study quoted by the British PM was “being read completely out of context”. “Such figures are certainly not ones that the commission would support”, she said. “When assessing the impact of the FTT in a balanced way, we must also take into account the effect that the new revenues will also have on growth and jobs,” she added, estimating the revenue at 57 billion euros a year. “So, if the revenues are intelligently recycled into the economy, then there would be no negative impact on growth and jobs at all, even in the long term.”

French President Sarkozy announces that France will unilaterally introduce a FTT In the end of January 2012 French president Nicolas Sarkozy announced plans to introduce a French tax on financial transactions. The 0.1% levy will be introduced in August 2012 in France regardless of whether other European countries follow suit. The tax is part of a package of measures, among them an increase of the sales tax and levies on financial incomes, set out by Sarkozy to promote growth, create jobs, and cut the French budget deficit. He faced a presidential election in two rounds in April and May and was behind in the polls against the Socialist candidate, Francois Hollande.

In an interview with French television, Mr. Sarkozy said he hoped the tax would push other countries to take action and he said; “What we want to do is create a shockwave and set an example that there is absolutely no reason why those who helped bring about the crisis shouldn't pay to restore the finances.”. Furthermore Sarkozy said that "We hope the tax will generate one billion euros ($1.3bn, £0.8bn) of new income and thus cut our budget deficit." President Sarkozy gave no further details on the tax, but a government source later told Reuters news agency it would target shares and not bonds. Sarkozy faced opposition from the nation’s banks. A France-only levy is opposed by the country’s financial community and its feasibility has even been questioned by the Bank of France. French Prime Minister Fillon said at a press conference the 30th of January that; “We can sense resistance within Europe, and that’s why we want to take the lead.” He also claimed that emerging nations, including Brazil, support France’s case for such a tax. UK Prime Minister Cameron stated: “If France goes for a financial transactions tax, then the door will be open and we will be able to welcome many French banks to the United Kingdom and we'll expand our economy that way.”

The Commission continues its campaign for EU FTT In the beginning of February the EU Tax Commissioner Algirdas Semeta writes in an op-ed in one of the largest Swedish morning papers, Svenska Dagbladet, that the myths about a new EU tax must be put to death. He claims that the figures from the Commission has been abused and misinterpreted. Among other things Semeta writes that a citizen that buys shares for 10 000 euro for sure can afford to pay a tax of 10 euro for that transaction. Rhetorically he asks; if ordinary citizens are forced to pay higher tax on salary, food and fuel and are affected by cut backs on public services, is it then unreasonable that the finance sector should not pay their part? However, Tax Commissioner Semeta is very unclear about who would get their hands on this tax incomes and what it would be spent on. He writes that it can be spent to consolidate the national budgets, lower other taxes or be invested in public service and infrastructure. No promises are made but it is the Commission that will get this money to play with. Already the day after, a Moderate15 Member of the Swedish Parliament, Karl Sigfrid, replies the Commissioner in the same morning paper. Sigfrid notes that the Commissioner does not write that the tax money will go straight into the budget of the European Union and that the tax has no base in the treaties. Among other things Sigfrid writes that the customers of the banks will have to pay higher fees, higher interest at their loans and receive a lower profit at their saving accounts. Also, Karl Sigfrid is sceptical to the notion to the EU tax would be spent in the member states with large deficits. Then these countries would not need to do anything more in order to clear their budgets. Instead the Commission, according to Sigfrid, should emphasize the importance of work and responsibility. A couple of days later two leading Moderate Members of the Swedish Parliament, Anna Kinberg Batra and Henrik von Sydow, also object to the op-ed of Commissioner Semeta. They write that good regulations are needed for stability, liability and growth – not unsound taxes that affect ordinary wage earners and make investments and new jobs more expensive in Europe.

The Swedish Moderates are member of the EPP – the European Christian Democrats.

About one week later EU Tax Commissioner Semeta and Swedish Moderate MP Karl Sigfrid dance again, this time in the Daily Telegraph. Commissioner Semeta writes an op-ed with more or less the same content as his op-ed in the Swedish paper, with some local variations referring to the City of London. What the tax income would be spent on is a blur this time also. Semeta writes two sentences on that: “There is an urgent need to balance budgets.” And “Clearly the FTT cannot alone solve national budgetary problems.” He does not specify more than that what this tax money should be spent on. Swedish MP Karl Sigfrid had a longer reply to the Commissioner this time. The final part of his answer was well formulated and deserves to be referred to in full as follows: “It's most likely no coincidence that the European Commission is trying to push through the transaction tax right now. A widespread mistrust towards banks makes it easier than it usually is to mobilise public support for bank taxes – rallying people against financial institutions with populist arguments. So what's in it for the Commission that makes them campaign for the new tax? A not-too-far-fetched guess is the €57bn that, according to their own calculations, will end up in the European Union's coffers. The money can then be used to stimulate the economy in near-bankrupt countries like Greece, Italy and France. Apart from the consequences of a financial transaction tax, it's worrying that the Commission seems to consider the tax an alternative to further strengthening budgetary discipline. Why else would they insist on making a connection between the transaction tax and the state of the European economy? I advise that the Commission, rather than promise simple solutions, emphasise the importance of work ethics and budgetary discipline. If France, Germany and other European countries on a voluntary basis introduce a financial transaction tax at home, they have every right to do so. But please leave the rest of us out of this costly experiment.”

Nine euro countries call for fast-tracked negotiations over EU FTT – February 2012 Tuesday the 7th of February nine eurozone countries – including Germany, France, Italy and Spain – sent a joint letter urging the Danish EU Presidency “to accelerate the analysis and negotiation process” of the European Commission’s proposal for an EU FTT, with a view to “completing the first reading of the draft directive in the first semester of 2012.” The latter said: "We strongly believe in the need for a financial transactions tax implemented at European level as a crucial instrument to secure a fair contribution from the financial sector to the costs of the financial crisis and to better regulate European financial markets." The nine signatories were the finance ministers of France, Germany, Austria, Belgium, Finland, Greece, Spain, Portugal and the Prime Minister of Italy, Mario Monti, who also held the finance portfolio. The then Danish EU presidency “welcomed” the letter and were “currently looking into how to accommodate the request” at the technical level – meaning a new political discussion among finance ministers – it stated in an email to the media. The fact that United Kingdom and a handful of other member states oppose the tax makes an EU-wide tax unlikely.

But the letter signals a move indicating these nine member states will go ahead on their own in the absence of an EU-wide consensus. The letter can suggest that the FTT could be introduced among fewer EU member states, with a minimum of nine member states needed to trigger so-called “enhanced cooperation” – a group of likeminded member states pushing forward on legislation to be joined by others at a later stage. At least those states that join this “enhanced cooperation” hope that they have the privilege to formulate the problem and set the agenda, with the hope that the rest of the member states will follow.

The European Parliament tries to keep EU tax at the agenda – May 2012 Wednesday the 23rd of May 2012 the European Parliament debated and voted on the Podimata report (A7-0154/2012 on the proposal for a Council directive on a common system of financial transaction tax and amending Directive 2008/7/EC in a consultation procedure. So it was more of a lobby report from the Parliament were they once again tried to keep the issue at the political agenda. The following is quoted from the last part of the motivation part in the report: • The management of the revenues The Commission's Proposal has no direct references to the management of the revenues. The report notes that a currently under discussion legislative proposal on the Multiannual Financial Framework 2014-2020 envisages part of the FTT revenues to become EU own resources. The FTT revenues could also be linked to specific EU policies and public goods, amongst them the financing of development aid goals, the fight against climate change, sustainable development and the social welfare state in EU or to the financing of national budgets, notably as a way to support efforts for fiscal consolidation. In short – the European Commission and the European Parliament want to get their hands on this income in order to spend it in the EU budget. If the EU FTT has a large support among the citizens of the EU countries is unclear. But some Members of the European Parliament seem to think so. During the debate Ms Sirpa Pietikäinen (from the Finnish right wing National Coalition Party, EPP group) said: “The financial transaction tax has broad support, not only in this House but also amongst our citizens.” If this is true is hard to say due to that this issue has not been up for public debate in the Member States. There were opposition voices in the debate. For example Olle Schmidt from the Swedish Liberal party and member of the ALDE group said: “Mr President, Ms Vestager, Mr Šemeta, it is not surprising that many European citizens are angry about the banks turning a deaf ear to calls for moderation and a reasonable approach to compensation and risk-taking. However, a transaction tax is not the right response to the citizens’ anger. It is a bad tax which risks increasing charges for ordinary bank customers, making investment in Europe more difficult, damaging growth and, as a result, jeopardising jobs. In addition, I believe that the calculation of the revenue cannot be relied on. This proposal has been under discussion for the last 40 years and it has been tried once in Europe, in my home country of Sweden. The result was that the majority of share trading moved from Stockholm to London. If a transaction tax has to be introduced, it must be introduced globally or at least throughout the entire EU. However, I think that the financial sector should pay more tax. A better model, for example, would be to introduce a stability fee for all banks.

To summarise very briefly, I think that the banking and the financial sector should pay tax. It is not a problem for me, but this is a bad tax which will have a counterproductive effect. Mr Šemeta, please try again and take a new approach.” Schmidt also agreed to take a blue-card question under Rule 149(8). Arlene McCarthy (British New Labour), “blue-card question”: “Mr Schmidt, would you not accept that the design of the FTT is fundamental, and therefore would you not accept that the Swedish model failed because it was based on the residence principle, which we are correcting by putting in the issuing principle, and that this is why there was relocation outside Sweden?” Olle Schmidt, “blue-card answer”: “Yes, Mrs McCarthy, but you do not know how that is going to work in practice. You do not know that because it is open to question; you may argue, but it is open to question. There are too many questions here. The Minister said that in her introductory remarks. Why cannot we be sure whether this is a good tax or is a counterproductive tax? Mrs McCarthy, I think I pay more taxes than you have done. I am prepared to pay more taxes but they have to be fair and they have to be good taxes. This is a bad solution.” Another Swedish MEP, Gunnar Hökmark (the Swedish Moderates, member of the EPP group) also opposed the FTT. He held the speech that follows: “Mr President, there are a number of reasons for Parliament to vote against the financial transaction tax. Firstly, Sweden tried this in the 1980s and it failed. It undermined Swedish financial markets and the City of London gained. It also caused more speculation, and all the experience shows that it did not help. Also, this was at a time when the financial markets were less global and less mobile. Now, the opposite is true. Secondly, even the Commission recognises that the financial transaction tax will lead to less growth. The discussion is about how much less growth, but it will give less growth, which is contrary to what Europe needs today. We need more growth and we need reforms that support economic growth and dynamic financial markets in Europe. Thirdly, the financial transaction tax is not providing us with new money. It will be paid by customers – those who are going to invest and those who trust in their future pension schemes. It will be paid by all of us, because there are no taxes paid by anyone apart from the citizens of Europe. This tax will not help in the Europe of today, so we should vote ‘no’.” Some interesting Roll call votes (RCV) at the Podimata report this day. First there was a RCV on amendment 40 to reject the proposal from the Commission. 112 members voted yes to reject it, 557 voted no and seven abstained. The Conservative ECR group close to unanimously voted to reject the proposal. Small minorities from nearly all group broke ranks and voted yes as well. Next interesting vote was at amendment 38 from Marta Andreasen (British UKIP) that proposed to add the text as follows: “All receipts from any FTT shall be at the disposal of the financial authorities of the

Member State. There shall be no hypothecation of any portion of an FTT to the European Union budget.” 176 members voted in favour of this, 479 voted no and 18 abstained. It was around the same allocation of yes and no votes between the groups as in the previous RCV. But it seems like the Greens/EFA group of 43 members voted wrong when they voted yes to the proposal. Afterwards 29 of them has noted in the minutes that they intended to vote no.

Amendment 36 was also from Marta Andersen (UKIP). It proposed to add the text as follows: “(1a) All

rules or conditions relating to the taxation of Members States require unanimity within the Council. The power to raise a tax is the exclusive competence of a Member State and the power to decide on the disposition of the tax remains the exclusive competence of the Member States.” This proposal was also rejected with 137 yes votes against 526 no votes and 15 abstentions. Amendment 41 was tabled by Wolf Klinz (German FDP) from the Liberal ALDE group. An addition was proposed as follows: “(18a) The Commission should also analyse alternative solutions, e.g. the

possibility of introducing a tax which is modelled on the UK Stamp Duty, with an extended scope that includes equities, bonds and derivatives.” The Stamp Duty has been seen as a milder form of EU tax that might have better chances to get approved by the Member States. This proposal was voted down with 260 yes votes against 351 no votes and 72 abstentions. The proposal had a considerably support in the ALDE and EPP groups. The resolution as a whole was approved with 487 yes votes against 152 no votes and 46 abstentions. The no votes came from the ECR group, a majority of the ALDE group and small minorities in the other groups. The yes votes came from the EPP group, the Socialist S&D group and the Greens/EFA group.

ECOFIN gives go ahead for group-of-11 for FTT – January 2013 Ministers at the Ecofin meeting in Brussels gave formally the 22nd of January 2013 consent for the group, marking at that time only the third time the EU's voting procedure has been used to allow a group of countries to press ahead with a special project, joining at that time divorce law and the recently established European patent court. A minimum of nine countries is needed to request the so-called enhanced co-operation procedure. EU taxation commissioner Algirdas Semeta described the step as a "milestone for EU tax policy", adding that "a block representing around two-thirds of EU GDP will implement this fair tax together, answering the long-time calls of their citizens."

The Commission comess back on an FTT with enhanced cooperation – February 2013 On 14 February 2013, the European Commission thus tabled a proposal (COM(2013)0071) for a Council Directive implementing this enhanced cooperation. As requested by the eleven Member States, this proposal is said to mirror the scope and objectives of the original FTT proposal. Annual revenues are estimated by the Commission to be around 30 to 35 billion euro, or 0.4 to 0.5% of the GDP of the participating Member States. Under so-called enhanced co-operation, a third of the member states can push for joint legislation in the absence of an agreement at 28-level. Germany, France, Italy, Spain, Austria, Portugal, Belgium, Estonia, Greece, Slovakia and Slovenia had at time subscribed to the FTT. Even though the law would apply to only 11 countries, all 28 member states would be involved in negotiating the legal text.

The European Parliament insists on its demand for an EU FTT – July 2013 At the vote Wednesday the 3rd of July 2013 the FTT was up for vote at two occasions. First there was a resolution on the political agreement on the Multiannual Financial Framework (RC-B70334/2013 tabled by EPP, S&D and ALDE). Point 13 in the proposed resolution was written as follows: “Deplores the fact that the Council has not been able to make any progress on the reform of the ownresources system on the basis of the legislative proposals put forward by the Commission; emphasises that the EU budget should be financed by genuine own resources, as provided for in the Treaty, and states its commitment to a reform that reduces the share of GNI-based contributions to the EU budget to a maximum of 40 %; expects, therefore, the Joint Declaration on Own Resources agreed between the three EU institutions to allow tangible progress to be achieved, especially in view of the mid-term review/revision of the MFF; calls, therefore, for the high-level group on own resources to be convened at the time of the formal adoption of the MFF Regulation with a mandate to examine all aspects of the reform of the own-resources system;” The text above was approved with 539 yes votes against 135 no votes and 30 abstentions. The three big groups EPP, S&D and ALDE voted yes with exception of some defectors. The no votes came from the Conservative ECR group, Danish Social Democrats, Scottish National Party, the EU critical EFD group and some more individual MEPs. But this day also a special report at the FTT was up for vote – the Podimata report (A7-0230/2013) on implementing enhanced cooperation in the area of financial transaction tax. It was according to the consultation procedure so it was more or less just a statement from the European Parliament. Due to criticism that the FTT will decrease pension payments there had been tabled an amendment from the Liberal ALDE group that pension funds should not be affected by the FTT. Amendment 58 from ALDE was written as follows (the text in italics wanted to change the text proposed by the Commission): “ A pension fund or an institution for occupational retirement provision as defined in Article 6(a) of Directive 2003/41/EC of the European Parliament and of the Council on the activities and supervision of institutions for occupational retirement provision, an investment manager of such fund or institution,

or an entity set up for the purpose of investment of such funds or institutions acting solely and exclusively in the interest of such funds or institutions, shall not be considered a financial institution for the purpose of this Directive.” The motivation for this amendment was as follows:

“The purpose of this amendment is to delete point (f) of Article 2(1) and to move the text of the amendment to a second subparagraph of Article 2(1) so that pension funds do not fall within the definition of 'financial institution' and financial transactions to which they are party are not subject to FTT under the directive.” But amendment 58 was voted down. It only got 225 yes votes against 458 no votes and 23 abstentions. The supporters of the amendment came from the ALDE group, the Conservative ECR group, the EU critical EFD group and 51 members from the Christian Democratic EPP group. But the Socialist S&D group, the Green/EFA group, and a majority of the EPP group voted no. The resolution as a whole was approved with 522 yes votes against 141 no votes and 42 abstentions. A solid majority from the EPP, S&D and ALDE groups voted yes. No votes came from the ECR group and most of the members of the EFD group and small minorities in the ALDE and EPP groups.

Backlash for the FTT â&#x20AC;&#x201C; Legal service in the EU Council consider it to be illegal â&#x20AC;&#x201C; September 2013 A blow is dealt against the FTT by an opinion from the legal service of the EU Council in Brussels. They stated that a financial transactions tax (FTT) for 11 EU countries would be illegal as it affects the tax sovereignty of other states. But the Commission insisted that the tax is in line with EU law, however. The lawyers serving EU member states said the proposed financial transactions tax "exceeds member states' jurisdiction for taxation under the norms of international customary law as they are understood by the Union." The 14-page legal opinion concludes that the proposal is "not compatible" with EU law "as it infringes upon the taxing competences of non-participating member states" and is "discriminatory and likely to lead to distortion of competition." "We strongly disagree with the Council legal service's opinion on the FTT," Emer Traynor, spokeswoman for the commissioner in charge of taxation, told the EUObserver. She said the legal opinion only dealt with parts of the proposal and that the Commission maintained that the FTT is "legally sound and fully in line with the EU treaties and international tax law." The Commission's own legal service was now set to "analyse in further detail" the legal opinion of the EU Council. "We expect the member states not just to take on the Council legal service's views, but to assess them critically against the commission's robust legal analysis of this proposal," Traynor added to the EUObserver.

The FTT faces more delays â&#x20AC;&#x201C; November 2013 In November/December 2013 it was reported in media that participating governments remain divided on key details of the FTT levy. At a meeting Wednesday 27th of November representatives of the 11 states agreed that the tax wouldn't come into force until 2015 at the earliest according to sources that had been present. The tax was originally supposed to be implemented on the 1st of January 2014, according to the Commission's proposal in February2013, but the Commission then said in June 2013 that the timeline had slipped by at least six months. "Given that [the 11 states] still need to draw up a compromise text, and then agree to it at the level of finance ministersâ&#x20AC;Ś2015" is a more realistic date, an EU official said. Negotiations had been on hold since the 9th of September, in part as the outcome of Germany's general elections the 22nd of September had to be over and done with. But the negotiations had also been making little headway before September, as the 11 states remained divided over fundamental issues, including the scope of the tax and how to distribute the revenue. In November 2013, the talks about the FTT regained some momentum after Germany's two main political parties, CDU/CSU and SPD, pledged in their new coalition treaty to "swiftly implement" a broad tax covering "shares, bonds, investment certificates, currency transactions and derivative contracts." In addition to the reference to the controversial currency trades, the coalition treaty also contained a significant caveat: that the FTT should be structured so as to avoid "negative effects on pension instruments, small investors and the real economy." That concern is shared by a number of other national governments, which worry about the impact of such a sweeping tax on Europe's weak economy and sovereign-bond markets, as well as on pension funds and personal savings. The financial-services industry, which has lobbied furiously against the plans, published two studies in November 2013 underlining the potentially damaging impact of the tax. The first, by PricewaterhouseCoopers, found that the tax might reduce gross domestic product growth by between 0.3% and 2.4%, based on past studies, while the second, by Oliver Wyman, estimated it would cost pension funds and insurance companies up to 50 billion euros each year. The UK government began a legal challenge to the tax earlier in 2013, amid fears it would be expensive to collect and risk driving business away from London's financial center. At the meeting the 27th of November France and Italy continued to push for a watered-down version of the proposal that would more closely resemble their own national FTTs, this was also supported by Spain, a person familiar with the discussion said. By contrast, a number of smaller countries argued that the tax should cover as broad a range of instruments as possible, the person said. Earlier this year, a consensus appeared to be building around starting with a more-limited tax on share trades, similar to Britain's stamp duty, which could be expanded later, according to participants. The UK's stamp duty covers only sales of stock in companies incorporated in the UK.

The FTT directive is declared legal by the Commission - December 2013 The European Commission has published a legal opinion asserting that "Based on the above analysis, the Commission's services come to the conclusion that [...] the proposed FTT directive is in conformity both with customary international law and EU primary law", but that this tax "does not lead to any inadmissible extraterritorial effects". It is mentioned that "the provision has no impact on the freedom of non-participating Member States to exercise their own tax competence in whatever manner they see fit".

The Commissionâ&#x20AC;&#x2122;s legal opinion contradicts the legal opinion made official by the legal service of the European Council, allowing the FTT project to continue. On December 18, the French minister for development Pascal Canfin came out supporting the FTT by stating, according to Euractiv, that it is "the best solution to address cash shortages for global development and climate policies". Indeed, he claimed "with European tax, we can solve the problem of additional financing for the fight against climate change". Then, Canfin explained that "having an European tax will allow us to do what we cannot do at national level. The aim is to tax flows that we cannot tax alone".

France and Germany announce a common wish to accelerate the FTT project - January 2014 The European Tax Commissioner Algirdas Semeta stated on January 18 that it was possible for the EU to reach a basic compromise for a common FTT in eleven countries. He said "My greatest concern is that the need for a compromise between eleven countries might lead to loopholes" and that "the worst scenario would be if member states agreed on a FTT but designed it with many loopholes that lead to a shift of financial transactions abroad". On January 27 of 2014, a statement by the French-German Economic and Financial Council reaffirmed the wish of the French and German governments to establish a EU-FTT. They assert that "France and Germany will make joint proposals to reach a compromise on a common scheme of taxation for financial transactions, within the next months, with all our partners from the enhanced cooperation. The target is to ensure a fair contribution of financial markets to tax revenues, improving financial stability and harmonizing national legislations while fully preserving monetary policy mechanisms and funding to the economy".

For the Commission the FTT is a tool to increase the popularity of the EU - February 2014 Algirdas Semeta, Commissioner responsible for Taxation and Customs Union in the Barroso II Commission, stated on February 4 of 2014, that "Europe needs to reconnect with its citizens. And the FTT is a prime example of a project which can help to achieve this. 64% of EU citizens support the Financial Transaction Tax, according to the latest Eurobarometer survey. This is a highly popular initiative, which Europeans believe in. [...] But strong vested-interest groups have worked tirelessly to impede progress, over-estimating the threats and negative impact of this tax. [...] It is time for all FTT supporters to stand up and team up for progress. [...] The Commission has always been clear that it would not stand in the way of an agreement on the FTT, as long as the final compromise does not open the way for avoidance or distortions, and does not alter the rights of the non-participating Member States. In this context, there would be nothing wrong with a gradual implementation of the tax. [...] I am pleased that the Greek Presidency has committed to giving priority to this file. Under its leadership, there is still time for the 11 Member States to converge before the European elections". On February 19th of 2014 a Franco-German Council took place in Paris where both countries agreed to reach a commitment with eleven European countries on the FTT before the elections to the European Parliament. The German position favored a board-based tax, going beyond France's reluctances to extend the more limited tax, also supported by Spanish Government. Indeed, this FTT was initially planned to impose a tax on trades of shares, bonds and derivatives but some governments seek exceptions for certain financial products such as pension funds and government bonds. Even if large EU-countries support the proposal divergences still impede the process of identifying precisely what form the tax will take. Despite these varying visions about the FTT, Chancellor Angela Merkel and

French President François Hollande declared on February 19 that they wanted an agreement before the European Parliament elections on May 25.

UK loses legal challenge against the FTT while skepticism is on the rise- April 2014 On April 30, the European Court of Justice (ECJ) rejected a legal action filed by the UK government on April 18th 2013, seeking to annul the EU Council decision of January 22 2013 authorizing enhanced cooperation in the area of the financial transaction tax. The UK’s legal challenge, based on the argument that the adoption of an FTT would cause "extraterritorial effects" to non-participating Member States was rejected by the ECJ which ruled that the Council's decision to allow for enhanced cooperation did not deal with the substantive element of the FTT itself. On April 4th 2014 the German and French Finance Ministers insisted that they aim to at least have "the first step" of a FTT in place before the European elections in May 2014, as their respective heads of state had declared some weeks previously. The German Finance Minister Wolfgang Schäuble recently stated that "we are determined to take a first step on the FTT still during this legislative term" while Michel Spain, French finance minister, spoke of a "need" to establish this kind of tax and his wish to accelerate the process. In the middle of April and during the European Parliament election campaign, the Finnish Social Democratic Party (SDP) promoted in its manifesto for the European Parliament elections the adoption by Finland of the financial transaction tax "to prevent financial speculation" among other propositions about financial issues as the division of savings and investment banks, and calling for a law to allow the recovery of executive bonuses "whenever necessary". Other Finnish governing parties rejected the SDP proposal as it was considered to treathen jobs and financial sector competitiveness, mainly in relation to Sweden.

A new initiative despite its rejection - May 2014 At a meeting of EU Finance Ministers' on May 6th 2014, ten of the eleven Member State’s initially backing the proposal (the lone exception being Slovenia) signed a declaration which consists of seeking a "progressive" tax on equities and "some derivatives" from the January 1st 2016. Slovakia, Estonia, Greece, Portugal, Austria, Belgium, Italy, Spain, France and Germany agreed to disregard the opposition from the United Kingdom and Sweden who see the tax as potentially damaging to their economies. On May 22nd 2014, Bundesbank President Jens Weidmann said "The problem requiring the financial sector to participate in the costs is that the tax does not necessarily impact those that are supposed to pay it", and he asserted "it is a fact that the transferal of the tax burden from the financial sector to its clients and therefore to the real economy and private investors is possible". On May 23rd 2014, two days before the elections to the European Parliament, Martin Schulz (SPD) representing the Party of European Socialists (PES) answered questions from the European Federation of Ethical and Alternative Banks and Financiers. He stated that "the regulation of the financial sector has been a key focus for the socialist family in the past years, and will continue to be in the future. [...] Much has been achieved thanks to the work of the PES family, both in the Council and in the European Parliament, despite resistance by the conservatives and the liberals. [...] much more work still be needed in the next five years, work which I am committed to undertake." He motivation for introducing the tax is that "the FTT is key for encouraging more responsible financial trading and putting an end to financial speculation. With the implementation of the FTT, the financial sector will finally contribute its fair share to society".

The self-imposed deadline to find a deal between the eleven EU countries who agreed to introduce the FTT expired on December 9th 2014. Negotiations did take place, but failed because of disagreements about how the tax should be collected. Although January 2016 remains the target date, recent negotiations in the ECOFIN Council of Finance Ministers indicate this is a hopeful timetable. Michel Sapin the French Finance Minister has stated that a deal is still possible in 2015 even if the project seems more difficult to implement. His predecessor and recently appointed Economics Commissioner Pierre Moscovici shares this view, declaring that the "FTT must not be abandoned" and that adopting this tax was a "moral duty". Austria's Finance Minister Hans Joerg Schelling stated that "it is possible but difficult". At the moment, negotiations seem paralyzed.

France tries to unblock FTT negotiations â&#x20AC;&#x201C; November 2014 In the beginning of November 2014 the French Finance Minister Michel Sapin urged his EU counterparts to make derivatives play a very small part in the tax base for the Financial Transaction Tax. Sapin hoped this would unblock negotiations on the FTT project. It was then noted in the media that the EU FTT was at a standstill. In October 2014 the subject was taken off the agenda of the Ecofin Council, and was not discussed at the meeting of French and German Finance Ministers on 20 October in Berlin either. But there was still hope for a launch of FTT in 2016. At this time it was an estimation that said that depending on the scope of the FTT, it could raise between 9.6 and 24.4 billion euro per year in France, according to the consulting firm SIA Partners. The Copenhagen Institute estimated that FTT revenues in Germany could be between 17 and 28 billion euros. "France is one of the greatest advocates of the Financial Transaction Tax, but also one of the main opponents of making it an ambitious tax," said Alexandre Naulot, of Oxfam France. "The enhanced cooperation is now at risk because of the French position," he added. In an editorial published in Les Echos on the 4th of November, the French Finance Minister, Michel Sapin, presented a compromise whereby shares and bonds would be taxed at 0.1%, and derivatives at 0.01%, a less ambitious project than the initial European Commission proposal. The Minister said that an agreement "is within reach," and proposed "taxing transactions on quoted shares [...]. States could extend the tax to unquoted shares if they so wished". Finance Minister Sapin also recommended applying the tax to only the most speculative of derivatives: the CDS, or Credit Default Swap. Another new proposal presented by the Finance Minister was that the tax should be collected on transactions issued by companies "based in one of the 11 participating countries [...] regardless of where the transaction takes place or where the financial intermediary is based". Some members of the enhanced cooperation group, particularly the smaller member states lacking in large business, would prefer the tax to be collected in the country where the transaction takes place. This would allow them to benefit from the FTT. To reassure these smaller countries, Sapin proposed the application of a "residency principle" to decide who collects the tax. In the case of a "Portuguese bank buying shares in a French business, the proceeds would go to Portugal; if these same shares were bought by a French bank, or a bank from outside the 11 participant countries, the proceeds would go to France," he explained.

But the chances of an agreement being signed by the end of December 2014 appeared small. According to an internal document from the German Federal Ministry of Finance, there was still "quite a distance" separating the positions of the Member states. This means the target date of the end of December 2014 would be "difficult, if not impossible to achieve," the document said.

France thrives on to get the EU FTT in place – January 2015 In the beginning of January 2015 the French President François Hollande told France Inter that he wants a European Financial Transaction Tax (FTT) in place “by 2017 at the latest”. Now Hollande wanted to ‘use FTT to fight climate change’ Although a 2016 launch date for the FTT appeared less and less likely, following the failure of the 11 countries to agree on the broad lines of the project in the December 2014 negotiations, François Hollande hoped he would put the project back on the right tracks. The French President's announcement went far beyond the intentions of the Ministry of Finance, which had been pushing for the tax to be limited to shares and some derivative products. Alexandre Naulot from Oxfam France welcomed the announcement, saying "after France's backtracking on the FTT in 2014, and the submission of Michel Sapin to the bank lobby, François Hollande seems to have taken control of the situation in favour of an effective tax to combat financial speculation. A really broad tax base will cover 97% of derivative products, which represent the most harmful transactions, previously excluded under Michel Sapin's plans". The question of where to allocate the proceeds of the tax has come back to the forefront, with French President Hollande announcing his wish to see the revenue in its entirety spent on the fight against climate change. This tax "should be used in the service of the climate, to fight against climate change," the French head of state said. "Many emerging countries are not prepared to sign an agreement on the climate at the end of the year" because they do cannot afford the necessary investment. "We have to find 100 billion dollars for the Green Climate Fund. So part, if not all of the Financial Transaction Tax should be used for the benefit of the Green Climate Fund," he said. This presidential U-turn was not without political motivation. Paris was going to host the COP 21 in December 2015, hosting representatives from 194 countries, who tried, and somewhat succeeded, to agree on a plan for reducing CO2 emissions from 2020 and keeping the global temperature rise below 2°C by 2100. One of the indispensable conditions of this ambitious agreement is that richer countries should help to finance this enormous project in the developing world. Although France has no obligation to dedicate part, or all, of the future tax to any particular domain, it has often reiterated its commitment to spend an important proportion of the revenue on international solidarity efforts, climate change and the fight against epidemics. The Financial Transaction Tax was introduced on a national level in France 2013, and a large part of the revenue it generates has been put into the French development aid budget, particularly health initiatives run by the Global Fund to Fight AIDS, Tuberculosis and Malaria, UnitAid (the international medication purchasing platform) and the vaccine alliance GAVI, whose funding is under pressure from budget cuts.

The proposed proportion of the tax to be used for climate issues caused controversy among NGOs, who fear that healthcare funding will lose out as a result. Alexandre Naulot, from Oxfam France, said "we are pleased that the President plans to dedicate funds to the fight against climate change, but we do not think that concentrating the FTT revenue on only one dossier is a good idea". Bruno Rivalan from the NGO Global Health Advocates said "choosing between the two would be to hijack the original objective of the FTT and let down the ill people that do not have access to treatment".

France and Austria table compromise for launching FTT in 2016 – January 2015 France and Austria sought on 22nd of January 2015 to break deadlocked talks with the nine other European countries for a FTT, by proposing that it be applied to cover a wide range of transactions, at low rates, starting 2016. In a joint letter to counterparts from the other countries, the French and Austrian finance ministers also suggested that one of the 11 ministers involved take charge of steering forward negotiations. Talks had so far floundered over what transactions to cover and at what rate, with countries seeking to win exemptions for assets that would hit their financial sectors particularly hard. Therefore, a new approach was needed to avoid diluting the tax, French Finance Minister Michel Sapin and Austrian Finance Minister Hans-Joerg Schelling wrote in the letter. "This fresh direction would be based on the assumption that the tax should have the widest possible base and low rates," they said. Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain had missed a year-end deadline to hammer out an outline for the tax as they struggled in particular to agree on what derivatives it should cover. Finance Ministers Sapin and Schelling said the FTT would have to be carefully calibrated to avoid the risk driving their own financial industries to other countries while also discouraging speculation, which has from the start been one of its main reasons for being. The 30th of January 2015 it was reported in media that ten of the eleven Eurozone member states committed to introducing the FTT announced that the tax would be introduced on the 1st of January 2016. The countries issued a joint declaration which stated that the tax should rely on “low rates covering the broadest possible tax base, while taking into account the risk and the real economic impacts of delocalising the financial sector.” Greece was the only participant not to sign the agreement. But there was a special reason for this. The Greek Finance Minister did not sign the common text due to the political upheaval caused by the victory of leftist party SYRIZA in the recent elections. The former Greek Finance Minister simply did not want to sign a commitment in the name of the new government. With this declaration the eleven countries breathed new life into the proposed Financial Transaction Tax, which stagnated after the breakdown of negotiations in December 2014. One of the major stumbling blocks in previous discussions had been France’s aversion to a German proposal that places a heavier levy on derivative products. Paris had advocated limiting the tax on derivative products to credit default swaps (CDS), in order to protect the interests of the big French banks like BNP Paribas and Société Générale.

Contrary to the new wave of political support for the project, opposition within the financial sector had not calmed down. The association for the Parisian financial sector, Paris Europlace, published a press release in which they reaffirmed their hostility to the FTT. "The renewal of efforts to establish the Financial Transaction Tax [...] is a very serious threat to small and medium sized businesses in the countries concerned, and particularly in France," the Europlace press release said.

German Finance Minister Schäuble not optimistic to reach a deal on FTT – May 2015 The 5th of May Schäuble tweeted that “FTT negotiations are proving very laborious, I am not very optimistic that we will reach a deal at Eurogroup summit on the 11th”.

EU Commissioner Moscovici tries to talk up the FTT negotiations – July 2015 The 8th of July the EU Economic Affairs Commissioner Pierre Moscovici tried to put in some positive spirit in the FTT negotiations – at the same time as he postponed the FTT introduction from 2016 to 2017. Moscovici said that the negotiations over could wrap up later in 2015 and the levy could be in place by early 2017. Talks among the eleven countries that have agreed to levy it stalled over what financial instruments should be covered and at what rate. Speaking at a financial sector conference in Paris, Moscovici said that the aim was to have a widely applicable tax but at a low rate. He said: "I have the impression that all of that (the talks) is going to wrap up during the autumn of 2015 with application at the start of 2017". French Finance Minister Sapin told at a news conference the same day that the tax could be applied in a first phase as early as January 2016 as it would be too complicated to have it fully up and running until later. But BNP Paribas deputing chief operating officer Alain Papiasse said that financial companies in the countries covered by the tax were considering moving operations to London, which had spurned the levy from the start. "The big risk for the European Union and the finance ministers concerned is to have a tax that doesn't bring anything in and causes business to leave for a financial centre respected by all but which is asking itself whether it wants to be in the European Union" Papiasse said in a reply to Moscovici.

Study on access to documents from the High Level Group on own resources – Spring / summer 2015 In a research project financed by OEIC the journalist Staffan Dahllöf requested for access to documents from the High Level Group on own resources through the Commission’s online form. It gave after 30 days some insight into what a central working group had been thinking about, although most of the released documents were known and available previously. An appeal of the decision not to make all the documents available resulted after a further 37 working days in the release of more documents, among them the records of the High Level Group meetings, albeit the most interesting and controversial topics were redacted.

The partial disclosure illustrates what is sensitive in the issue of the EU's own resources, as it illustrates the areas that the Commission has the greatest interest in protecting against transparency, both from the public and from the Member States (!). Staffan Dahllöf asked through the document register open form on March 17 to request access to documents that have been received and sent by the High Level Group on own resources since February 2014. On May 4 access was granted to parts of the High Level Group acts, in all 21 different files sent electronically, plus four links to documents from the European Parliament. The provided documents were: • • •

Meeting invitations, with agendas for six meetings of the group from the first meeting 2014-0403 to the sixth meeting 2015-03-23 - in all six files. Three reports and a presentation from external experts participating in group meetings - in all four files. An initial interim report on the group's consideration and further work by December 2014, various documents from EU institutions (the list of VAT ranges of the Member States, a report from the Court on how to calculate GNI, the conclusions of the Summit in February 2013 statement about the long-term budget 2014-2020 and working papers, reports and resolutions from the European Parliament) - in all ten files, plus three links; all previously published and available documents.

The request for access so far yielded new knowledge about when the group held meetings, what they would have talked about, and insight into the advice and arguments that the group has received from outside experts. An interesting example is the expert Gabriele Cipriani’s illustration with a fictitional café receipt of how a EU VAT can be made clear, but without discouraging citizens. However, the provided documents gave no new knowledge of how the group work progresses - in addition to the preliminary and are already available report from December 2014. They also showed that the group possesses documents not disclosed - including former draft papers that will be published later, record of discussions at the meetings and documents to help individual members. Nadio Calviño, Director General of the Budget Directorate justified refusal of access to the documents with Article 4.3 of Regulation 1049/2001. A full disclosure would undermine the group and later the Commission's work unless there is "overriding public interest in disclosure”. The decision not to disclose all documents was appealed to the Commissions General Secretary the 5th of May 2015. The appeal used the following arguments: • •

•

Article 4.3 refers to the protection of the EU legislative procedure, while HLG work is about preparing a possible forthcoming legislation. It is therefore questionable whether the invoking exception is at all relevant. If, on the other side, the group's work should be seen as part of a legislative process, we have as citizens an entitlement to see the actors' different position. It is in line with the European Court of Justice ruling on the right to take part in Member States' arguments in the Council of Ministers before the Council has reached a decision. The issue of direct or indirect taxes to the EU is known and debated, it is hard to imagine that someone in the group would feel restricted in their work on his or her arguments became widely available.

•

It is extremely difficult to imagine that the question of how the EU will be financed in the future - and what the money will be used for - would not be an overwhelming public interest.

Furthermore, it was pointed out that the Director General's reply was missing a list that could make it possible to see which documents were not disclosed. The Commission’s Secretariat General sent a notification via email 2015-06-01 that the confirmatory application (= appeal) was now finished but the answer was not yet approved by the Commission's legal service and the "higher up in our hierarchy", and therefore would not able to meet the deadline on 1 June. The deadline for replies was now extended to 22 June, with an assurance that it would do its best to come back before then. A reply arrived at the end of 23 June, a day after the promised final answer. After the decision of the Commission’s Secretary-General, Catherine Day, five additional documents were released in their entirety; a report on how to calculate gross national income (GNI), a compilation of the member countries different discounts, a summary of which own resources are subject to VAT, a strategic signpost ("roadmap") for the group's continued work and a specification of a upcoming assignment for an investigation. None of those documents contained particularly interesting information. Further releases include minutes from five of the cherished meetings, a "Reflection Paper" from the group's secretariat, as well as three drafts of the preliminary report that had been officially published in December 2014. In all of these documents were central and "sensitive" parts redacted = painted over with black. The appeal led to that additional documents were disclosed, and a detailed justification of why parts of the released documents were not. In the unredacted parts of the minutes from the meetings some interesting information is found, for example how the invited experts describe the past decade as a "socially lost decade" for the EU, and is referred to the following:

"The crisis has demonstrated the inadequacy of the structures in the euro area (EMU without appropriate budgetary tools), and the deeply flawed economic strategy based on the idea that the source of the crisis, fiscal debauchery, when in fact it was a banking crisis.” The minutes also show that the group discussed the need to distinguish between the EU and the euro area, which should establish some form of government functions to protect the single currency. It also appears that new forms of direct taxation, such as an EU VAT regarded as highly sensitive, and that the group is concerned that future direct financing of the EU budget should not be perceived as a tax increase. For those interested, these pieces help to understand what the High Level Group is working on, and might propose. Whether the pieces of the puzzle are in proportion to the labour employed for more than three months is another story. The fact is that what the High Level Group on own resources do is not transparent. It is an important principal issue this group work with, but their work is concealed until the day they agree to present a proposal.

A final push for European FTT reported in the media – September 2015 In September it was reported in media that after years of lukewarm discussions, some EU countries were now moving toward a final agreement on a European FTT, though neither those in favour nor those against the idea were satisfied with the compromise proposed. The banking industry said it would hit the economy and advocates complained that the tax would be too weak. The FTT was going to be discussed on the sidelines when the EU finance ministers met in Luxembourg Friday and Saturday 11th and 12th of September 11-12. Austria, which led the discussions, had prepared a paper on the way forward and the eleven EU countries involved in the talks were said to get closer to an agreement. The aim was said to reach a deal by the end of 2015 and for the new tax to be put in place by the end of 2016 or early 2017. Jan Van de Poel, policy officer at 11.11.11, a Belgian platform of development non-governmental organisations (NGOs), said that as talks proceeded less and less instruments were covered since member states are pushing for different exemptions. Van de Poel described it as a race to the bottom. “The big risk is that in the end there is not much left. What we see now is that different countries try to get exemptions that are important to their own financial sectors and financial industries. So for instance, some countries want to take out derivatives, which is a big piece of the market, you should have that in. Other countries are arguing to exempt pension funds or other instruments. So that is what we basically see, that everyone is defending the interests of their national financial sectors,” Van de Poel said. He called for a broad scope of instruments to be covered by the FTT. The argument that some instruments are important for the real economy to function properly is flawed, he argued. “Because instruments themselves are not speculative. What you do with an instrument, that’s speculation. If you buy and sell it 100 times a day, then you’re speculating and it doesn’t matter what instrument that is. That way it doesn’t make any sense to exempt instruments from the FTT,” Van de Poel said. A smaller number of instruments to be taxed would lead to lower public revenues, especially if the Member states decide to exclude derivatives which constitute a large part of the financial market. In a written statement the European Banking Federation told Euranet Plus that FTT is still a bad idea, even with a smaller scope of instrument touched by the tax. At a news conference after the Euro group meeting in Luxembourg Saturday the 12th of September EU Economic and Financial Affairs Commissioner Pierre Moscovici said an EU deal on financial transactions tax 'within reach'. Political agreement was said to be close on a tax on financial transactions after talks on Saturday between Finance ministers of the 11 EU countries willing to introduce the levy, Moscovici told reporters. "Today we made important, if not decisive, progress ... This deal is within reach," Moscovici said after the meeting in Luxembourg, adding the target is to seal an agreement before the end of the year. "We made important steps ahead," Italy's Finance Minister Pier Carlo Padoan told reporters after Saturday's meeting. Ministers from Germany and France echoed his view, although a further meeting would be necessary in October to find common ground on how to levy the tax, on which financial products, and its rate.

"After the (political) decision, it takes time for the FTT to function, something like nine months to a year," Moscovici told reporters. But - there still appeared to be significant differences that remained between some of the EU-11 countries. For example, there was no consensus on whether any market maker exemption would be included. There was also concern that an EU FTT may be incompatible with the objectives of the Capital Markets Union, especially if the tax is introduced by a subset of Member States. The future of the EU FTT remained uncertain in spite of EU Commissioner Moscovici tried to talk it up and paint a bright future for it.

Former ECB President: FTT limited to eleven EU countries would penalise France – October 2015 Le Figaro the 20th of October 2015 featured an open letter to French President François Hollande, under the headline, “A financial transaction tax limited to eleven [EU] countries would penalise France.” Signatories included former ECB President Jean-Claude Trichet and Jacques de Larosière, who chaired the High Level Group on EU Financial Supervision. The letter read, “In Europe, the big competing [financial] places are clearly expecting that a tax limited to eleven [EU] countries will constitute an insurmountable handicap for the financial places that adopt it – Paris in particular…It is essential not to embark on a path that is laden with consequences in terms of employment for our country and is very negative for Europe in terms of the functioning of capital markets.”

Deadline nears and EU FTT seems to falter – November 2015 In the beginning of November 2015 the Austrian Finance Minister Hans Joerg Schelling, who led the negotiations, set a deadline to decide how to charge levies on an array of financial products. But that was maybe too hasty to make a declaration like that. In the end of November the negotiating countries still had not decided what trades to tax, how to calculate levies or how to treat pension funds and government bond-related transactions, according to a document prepared for technical talks. The slate of unsettled topics suggested the countries would have trouble meeting the December deadline. “The FTT scope of transactions in shares has been subject to higher controversy,” according to the document, which was prepared for tax talks among all 28 EU nations and obtained by Bloomberg. The document asked whether the tax could work if it excludes pension funds, clearinghouses and marketmakers, and whether such a design would raise enough revenue. The eleven nations needed to decide soon if they were going to press ahead or stop to try, Austrian Finance Minister Schelling said after a meeting the 10th of November 2015 in Brussels. Italy continued to push for the tax to include sovereign debt derivatives, while most other nations had agreed to exclude those derivatives along with government bonds. Slovenia and Estonia wanted the tax to have a broader cross-border reach to ensure it would raise sufficient revenue to be worthwhile. Schelling said that Slovenia and Estonia “are both very small countries with small financial markets” so their concerns make sense, he said.

One way forward was seen, to exempt derivatives trades that are directly linked to government debt. The working document asks if this would create “substitution effects” as the market shifted into non-taxable transactions. “Do you foresee any possibility of significant increase of focus by trades on exempted futures, forwards, options, credit default swaps etc. on sovereign bonds with a potential repercussion on the instability of underlying bond markets?” the document ruminated. Specific questions raised in the document included whether it makes sense to tax gross trades, as initially proposed by the European Commission, and whether the tax would be easier to implement if it exempted shares from outside the participating nations. It asked what kind of national options would be workable, and what methods would work best for derivatives trades. The tax is aimed at proprietary trading, not market-making, according to the paper. At the same time, it asks whether exclusions should be limited to instruments that don’t trade frequently, or whether it’s possible to tell the difference: “would a market-making exemption be permissible if no objective criteria can be defined to distinguish market-making activities from taxable proprietary trading?” On the subject of pension systems, the document asked whether they should be exempted or fall under a separate tax structure. The paper tried to identify if such carve-outs would “result in distortions between the different products used for old-age retirement provisions” and whether taxing pensions could be left as a national option. Spanish Economy Minister Luis de Guindos told reporters after the meeting the 10th of November that advances have been made and that there was consensus that derivatives on government debt would not be included in the tax’s scope.

Agreement on an EU FTT, but many details remain to be filled in – and Estonia leaves the project – December 2015 December was a month of desperation in order to put an agreement in place due to a self-imposed deadline. The eleven Finance Ministers that wanted to introduce a harmonised tax on financial transactions had the basis for a deal on the table for their meeting Monday the 7th of December. Would this be the end of negotiations that had dragged on since 2011. "We have the basis for an agreement on the table... We are in the last centimetres necessary to meet this agreement, not the easiest to achieve but I think we can make it and we must make it. We can make it and must make it now," EU Commissioner Moscovici told a news conference ahead of the meeting on the FTT. He was as optimist as ever – it is his job. But German Finance Minister Wolfgang Schaeuble told reporters before the meeting that he was "reasonably skeptical" that a compromise was getting any closer. "We have had so many meetings on this topic and then it always fails on some point in one of the member countries," Schaeuble told reporters. "I don't know what else to do. We have to find an agreement. Maybe we'll succeed today and if not we'll renew our efforts next year." The eleven participants at the meeting was going to focus on how the tax plan should handle derivatives, offer sovereign debt-linked exemptions, and treat market-making activities, an EU official told reporters in Brussels.

Austrian Finance Minister Hans Joerg Schelling said there was a new compromise proposal that might be acceptable. "It's right that we don't have far to go, but as you know the last meter is often the hardest," he said before the meeting. But a breakthrough came Tuesday the 8th of December 2015. Ten EU countries agreed then on "core principles" for a financial transaction tax (FTT). Not without problems though, real discussion was delayed and the UK threatened to court action if the tax goes against its interests. After a late night meeting on Monday the 7th, Finance Ministers from Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain presented a one-page proposal to their EU colleagues on Tuesday, outlining how shares and derivatives could be taxed. On shares, they decided that "all transactions including intra-day should be taxed" but that "a narrow market-making exemption might be required." On derivatives, they said "the taxation should be based on the principle of the widest possible base and low rates" and should not affect sovereign bonds issued by member states. The document is "an important step forward [that] signals a very clear will to go forward," EU Financial Affairs Commissioner Moscovici said. But the agreement in fact represents a double setback for promoters of the FTT. This is mainly Austria, who chairs the group, France and the EU Commission. As described above they launched in the beginning of 2015 a round of talks with the aim of starting to implement the FTT on 1 January 2016. Then they hoped to reach agreement before the Paris climate conference and use the tax to fund the fight against climate change and development aid. The next deadline is now June 2016 and the talks will continue under the EU Council presidency of the Netherlands, a country that is not involved in the plan. The second setback was that Estonia now left the group of countries willing to introduce the FTT. Estonia's opposes the levy as it worries most of the shares traded by its financial institutions are issued outside the participating group, meaning it would be left with hardly any revenue. After the scope of the FTT was established for shares issued in participating countries, Estonia "calculated that the cost of collecting the tax compared to the revenues would not make the tax worth it," an EU official explained. Just when the deadline for a final agreement came up, the ten remaining countries approved a proposal that at least keeps the hope for introduction of EU FTT alive. Beware, to proceed with the plan under an enhanced cooperation format, there must be at least nine volunteer states. More defections would kill it. To keep members on board, the document states that "further analysis â&#x20AC;Ś is required. Negative impact on real economy and pensions schemes should be minimised." "What we achieve is modest," Germany's Wolfgang Schaeuble said during the finance ministers' meeting. "The alternative was to get nothing as that is worse." Schaeuble also uttered some reservations when he suggested that more participants would be necessary to make the tax worthwhile.

"The only thing we can do is to take note of the group document and say that we are going to pursue this next year," said Luxembourg's Finance Minister Pierre Gramegna, who chaired the meeting. The bulk of the discussion, on the rates applied on all different instruments included in the tax, has not even started. "Now that the principles have been agreed, talks will be about what tools are available and how you can draft the legal language," the official said. As a fiscal issue, the FTT, whenever it is finalised, will require unanimity of the 28 member states even if it is implemented. One member state will be crucial to reach any deal - the UK. Its minister George Osborne poured cold water on the ten countries' enthusiasm. The one-page proposal "is a piece of paper, it's not an Ecofin document," he told his colleagues, using the abbreviation of the Finance Ministers' council. During discussions of EU finance ministers, Chancellor George Osborne warned, "We can challenge this financial tax in the European court if this implicates other states including the UK". The ten countries can go on with the FTT plan, he insisted, but "it's their business, provided the impact is felt by them." He added that the result is "very uncertain." The timing for the UK Tory government could have been better. A referendum on the way in UK about to leave the EU was coming up 2016 or 2017. Relations between the UK and the euro zone, as well as guarding of City of London activities, were at the centre of talks to keep Britain in the EU. But George Osborne went even further than a political warning and threatened with legal action. "I make it very clear that if the proposal impacts on the United Kingdom, other non-participating states and on the single markets, we will have to go to court," he said. Luxembourg's Finance Minister Gramegna said that many countries, along with the UK, had raised concerns over the extra-territoriality of the tax (the idea that it will impact countries that have decided against taking part). So a sort of deal about EU FTT came to place and the supporters of the project saved their faces. But a very thin document was not that impressive. It just helped to push the deadline on to June 2016. No one lost, but no one won.

WHY OPPOSE AN EU TAX Eight reasons to say no to an EU tax

During the current economic crisis, most member states have made painful spending cuts. The European Union increases its spending every year, and will use the tax to do so in the future. The European Parliament wants an EU tax so they can sidestep the resistance of national Ministers of Finance who do not give the EU budget a priority over their own health care, schools, and welfare, which have been dramatically cut. History suggests that if the EU gets the right to directly take in taxes, they will raise tax levels each year. Citizens will have no voice in these decisions. The new EU tax will not be â&#x20AC;&#x153;tax neutralâ&#x20AC;?, as the politicians claim. Any new tax, whether on value added, air traffic, or the banking sector, will ultimately be paid by ordinary citizens. Through this tax, citizens will be forced to pay double bills. Currently, EU funds are being spent to open EU embassies around the world, even though member states are unwilling to close theirs. This pattern of double structure can be seen in many parts of the EU budget, including the Security and Defence Policy, which competes with the current NATO structure. The EU already has problems spending the full budget of the European Social Fund, the European Regional Development Fund and the Cohesion Fund due to the difficulties of funding good projects. There is no need to increase the EU budget. Many EU projects are wasteful, while others bring poor results. What is needed is better scrutiny of the existing EU budget, not an EU tax. In principle, the European Union should be governed by the member states, not vice versa. The European Union should not have the right to directly tax citizens in the member states.

To get an EU tax by proposing a Tobin tax - As the EU institutions hope is the most popular new tax to introduce This booklet gives a background of the debate about an EU tax in the European Parliament from the first half of the 1990’s until now. The federalist majority in the European Parliament has over the years gradually increased their outspokenness for introduction of an EU taxation. The issue has not been up for debate in the European Parliament election campaigns and due to that the EU federalists have met very little resistance to the idea. It is about time that the issue is now brought up for debate. Also the facts around the EU tax issue are clarified in this booklet. Hopefully this booklet gives an introduction to the debate and facts of the EU tax as clearly and concisely as possible. However, the reasons for the European Commission and the European Parliament to argue for the introduction of an EU tax can be summed up as follows: •

An EU tax will give the EU financial autonomy and Member States can be ignored if they do not want to pay up for the expansion of EU policy areas.

•

The EU institutions need more and more money for example to expand the Common Agricultural Policy budget. The farmers in Western Europe should keep the subsidies at the same time as the farmers in the new Member States in Central and Eastern Europe must finally get the same subsidies as those in the West. This and a growing number of new policy areas in EU that need to be financed makes EU desperate for new incomes.

The EU tax will not be tax neutral unless the Member States cut back in their budget in order to make room for the EU budget to grow. This they are reluctant to do and therefore the introduction of an EU tax is not tax neutral. Furthermore, in Brussels those in favour of a financial transfer tax (FTT) as an EU tax knows how to manoeuvre to get what they want. For example a FTT could be introduced by so-called “enhanced cooperation” with a minimum of nine EU member states. As the FTT needs only one connection in one of the member states that has implemented it the trade in countries like United Kingdom and Sweden will be affected anyway, even if they have rejected it. The FTT as such – whether it is a good idea or not I do not have a point of view on – I just do not support the idea that it should finance the above mentioned. Further developments in this issue – follow that on www.oeiceurope.com The opinions in this booklet are not the opinions of the OEIC but those of the author.