EU warns against German financial transaction tax

EU warns against German financial transaction tax
Photo: DPA
The European Union has poured cold water on Germany’s call for a Europe-wide “financial transaction tax” – one of the government’s mechanisms to slash the budget deficit and curb short-term, speculative trading.

Business daily Handelsblatt reported Tuesday that an unpublished assessment by EU tax commissioner Algirdas Semeta warned that such a tax could have “considerable unwanted effects” such as driving up the financing costs for businesses and governments.

The tax could also intensify fluctuations on stock markets, the report warned. Furthermore, the tax would not apply to all securities and financial instruments equally – rather, the more common a security, the more strongly would it be taxed, Semeta said.

“For example, shares of bigger companies with many shareholders would bear a bigger tax burden,” Semeta said.

Also, there was no guarantee that the tax would only affect wealthy investors and speculators. Rather it would have to apply also to pension funds and life insurance funds, for example.

Chancellor Angela Merkel has backed such a plan, as has Germany’s neighbour France.

A financial transaction tax was part of the government’s raft of tough budget measures announced it June. At the time, Merkel said the chances that neighbours would agree to a European-wide levy were “not bad.”

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