Date: 5th October 2016

Following their annual joint meeting, France and Germany are willing to join forces to find an agreement on a European financial transactions tax by the end of May.

In a joint press conference, Francois Hollande, the French president said that he would “prefer an imperfect tax to no tax at all”. Angela Merkel, German chancellor, said that setting a target for anagreement on concrete proposals before European parliament elections in May could be decisive.

Wolfgang Schäuble, the German finance minister, added that a phased introduction would be better than abandoning it, suggesting that it could be applied to shares first and derivatives later.

Member states seem to agree on a stamp duty tax on equities and equity derivatives as a first step, which could be expanded on later, but other contentious issues remain. At stake is how ambitious and automatic the second phase of the tax should be since France and Germany have not yet reached a compromise on this aspect.

Divisions between the 11 EU member states that have signed up to implement FTT still have to be bridged. Although most of them back the FTT in principle, deep reservations about its most ambitious form still remain. The heads of employer unions in nine of the 11 states, including France and Germany, have indeed written a letter to the European Commission president and the head of the European Council expressing their strong opposition to the FTT.

Member states subject to enhanced cooperation such as Austria and Estonia are no longer expecting an agreement before 2016, claiming that the FTT proposal is losing support as its expected scope shrinks.

As BETTER FINANCE feared, the proposal still does not ensure a fair and substantial contribution by financial institutions and it is now increasingly likely that EU citizens will again bear the bulk in lieu of financial institutions.

Please read the Financial Times article here.