Germany advances new EU financial transaction tax proposal

By Ninja-Antonia Reggelin, Berlin

German Finance Minister Olaf Scholz has presented a draft directive introducing a financial transaction tax in Europe.

“For the first time since 2011, we are ready to reach an agreement,” Scholz wrote to European finance ministers on Monday. According to Süddeutsche Zeitung, the legislative proposal – provides for a tax on share purchases to be initially introduced in ten countries.

The draft law provides that persons who buy shares in large companies will pay a tax of 0.2 percent of the business value to the tax authorities. The tax only applies to shares of companies that are worth more than one billion euros; in Germany, the tax will fall on 145 companies. For the ten countries considering the measure- Germany, Belgium, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia – the tax would fall on more than 500 companies.

At the same time, exceptions would apply. Thus, IPOs of companies are excluded for the procurement of fresh capital. Each country is also free to decide whether to tax equity funds and similar products for private pensions.

According to Handelsblatt, French Finance Minister Bruno Le Maire welcomed the proposal. The Austrian Finance Ministry reacted more cautiously, noting that the tax base was minimal. Scholz’s proposal would not tax transactions in synthetic investment products and derivatives. Highly speculative high-frequency trading would also be excluded.

The participating states have not agreed on how the revenue from the financial transactions tax will be divided. According to the German proposal, the five countries with the highest incomes are to hand over a small part of their revenues to the other countries, so that each participating country receives at least 20 million euros of financial transactions tax revenue.

Negotiations on the financial transactions tax began in the EU in 2011, driven by the desire to levy banks and stock exchanges for the high costs incurred by taxpayers from the financial crisis. The second goal of the tax was to contain the speculation in the financial markets with a tax.

One year later, several EU countries announced their opposition to the introduction of an EU-wide financial transactions tax. The tax base was subsequently narrowed; however, the number of countries willing to participate decreased. Currently, ten countries continue to pursue the project under the EU enhanced cooperation mechanism.