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EU Commissioner for taxation, Customs Union, Anti-Fraud, Audit and Statistics
"Financial Transactions Tax: The Way Ahead"
Meeting of Members of the Finance and Fiscal Committees in the Danish Parliament
Copenhagen, 19 March 2012
Ladies and Gentlemen,
I would like to thank the Danish Parliament for inviting me to this conference and giving me the opportunity to address such a distinguish audience.
The European Commission places great value on strong relations with National Parliaments, as well as with the European Parliament. It is through such relations that we can engage with citizens via their elected representatives. This not only enables us to better understand and respond to citizens' legitimate expectations. It also helps citizens to have a clearer view of what we are doing for them at EU-level. Never has it been more important to reinforce the connection between the EU and its citizens, and to explain clearly our proposals and decisions.
The challenging economic times that we are living through give rise to understandable insecurity, which in turn breeds uncertainty and even scepticism.
Over the last two years, our attention has been focused on crisis management. I believe we achieved a lot in terms of reinforced economic governance. The instruments we have developed, notably the Six-Pack and the Treaty on Stability, Coordination and Growth are proof of the joint commitment to economic discipline and convergence.
As a result, the strain on the Euro area has been reduced, although we cannot yet say that we are out of the woods. But we can now look beyond short term "fire-fighting" and focus on long-term growth. On a growth model that is smart, sustainable and inclusive.
The growth strategy and the contribution of EU budget
The primary framework through which we are working to achieve this is the Europe 2020 strategy, along with the Roadmap to Stability and Growth which the Commission presented in October.
At the last European Council, EU leaders endorsed the orientations of the annual growth strategy as proposed by the Commission. Implementing reforms both at EU and at national level is now the priority. And we now have a clear and agreed roadmap towards structural reforms, deepening of the Single Market, boosting trade with foreign markets and targeted investments.
In this context, the EU budget has an important role to play. It will contribute to the investment needed to help Europe exit this crisis, as well as to respond to global challenges.
When the Commission made its proposals for the future EU financial framework last year, we sought to strike the right balance between current fiscal consolidation needs and the longer term ambition of increasing investment in a number of priority areas.
In terms of expenditures, our approach was straightforward: : we made the overall ceilings for the next Multiannual Financial Framework "constant in real terms", based on 2013 level.
Through this "de facto" freezing of 70% of the budget – that is, the parts related to cohesion and agriculture – we create substantial savings which can be used for increases in other growth-related spending areas: research and innovation, 'Connecting Europe' facility, cross border mobility in education and external policies.
In terms of resources, it is our conviction that the budgetary consolidation efforts in Member States must be reflected in the EU financing system. This is the rationale behind the proposal for a new own resource, based on a harmonised Financial Transaction Tax. If revenues from an EU FTT were partially allocated to the EU budget, national contributions to the EU budget could be reduced. As a result, Member States would gain greater room for manoeuvre in managing their currently scarce resources.
The case for an EU financial transaction tax
Even beyond the issue of own resources, however, I strongly believe that Europe has to lead on the implementation of the FTT. And I am not alone: Citizens as well as policy makers want the financial sector to make a fairer contribution to the cost of the crisis and to public revenues.
The concerns have been heard
I know the concerns that have emerged in the discussions on our proposal. I am well aware that some of you have prepared opinions in the context of protocol 2 of the treaty on the control of the subsidiary principle. Others have also transmitted contributions as part of the political dialogue between the Commission and National parliaments.
At this stage of the debate, I am not surprised that some interlocutors continue to look for clarification and reassurance. This is perfectly normal in negotiations on such an important and sensitive file. Your contributions will be carefully assessed and taken due care of in the context of the current negotiations.
Let me here reiterate that we have been particularly careful in the design of our proposal to provide strong measures to mitigate relocation risks and tax avoidance effects.
And we have equally worked to limit the incidence of the tax outside the financial sector, so as not to overburden citizens, non-financial companies or occupational pension funds.
As a result, the tax would be levied on financial transactions carried out by financial institutions established in the EU, wherever they intervene in these transactions. Thus, it is not a question of where a transaction takes place, but who is party to the transaction.
To put it simply, one would have to abandon their entire EU client base to escape the tax. This is not a realistic scenario for a tax levied at such a low rate. A tax whose nominal amount would often be negligible compared the other fees and charges imposed by various actors and intermediaries on financial markets.
Moreover, the day-to-day financial activities of ordinary citizens or companies, such as mortgage loans, deposits or bank borrowing, will not be taxed. Nor will emissions of securities on primary markets, so as not to affect capital raising in the private and public sector. This protects institutional investors who are primarily active on such primary markets.
It appears today that most of the Member States are keen that we go for a European solution. It will prevent a piecemeal approach within the Single Market, and offer a robust blueprint for a global FTT.
Where are we in the negotiations?
Last week, EU Finance Ministers expressed general support for the objectives of the proposal and agreed that technical work on our proposal must continue.
At this stage, we can identify key areas in the proposal where the opinions of the Member States diverge.
For its part, the European Parliament has already expressed its wide support for the introduction of a financial transaction tax in the European Union. Its economic and financial committee is currently working on a report on the Commission's proposal.
I am confident that this report will contain very constructive elements to further strengthen the workability of the tax, which could feed into the work towards a satisfactory compromise at EU level.
Conclusions: The way forward
Before I conclude, let me outline where I believe the proposal for the EU FTT to be now. Following the meeting of Finance Ministers last week, we appear to be moving in the direction of political compromise in order to achieve consensus amongst all 27 Member States.
This compromise should be founded upon the solid technical discussions on the Commission's proposal, which are already well underway. It will require strong leadership by the Danish Presidency, and a group effort from all Member States.
Some are already asking whether we should look for alternative routes to agreement, by moving ahead at less than 27. I say that the time is not ripe for such a move: we must maintain the active engagement of all Member States that we have seen up to now.
I continue to believe that the FTT applied across the entire EU is the best way of meeting our objectives, ensuring that every EU citizen can benefit from the tax.
One thing is absolutely clear: Member States must reach a decision on the FTT, and we must do so quickly. This is what citizens expect. It is what markets are looking for. And it is what many Member States have called for.
I have confidence in the Danish presidency to deliver. Back in 2002, the Danish presidency managed to reach agreement on the biggest enlargement of the EU. At the same time, in the tax field, the Danish presidency worked hard and delivered on key directives – on energy tax and taxation of savings. With such a track record, I believe the FTT proposal is in good hands.
I thank you for your attention and I will be pleased to participate to the debate today.