24/03/17

Fate of EU Financial Tax Hinges on Belgium, Slovenia, Slovakia

The European Union’s roller coaster negotiations among 10 countries to establish a financial transactions tax could be derailed in May if Belgium, Slovenia and/or Slovakia decide to pull out, reports Bloomberg.

Speaking March 21 after the latest closed-door financial transactions tax meeting, Austrian Finance Minister Joerg Schelling, who chairs the negotiations, said that without nine countries it would legally be impossible to continue pursuing the levy on share, bond and derivative trades.

The 10 EU countries negotiating the financial transactions tax, or FTT, are using a special legislative procedure known as “enhanced cooperation"—designed to get around EU rules requiring unanimous consent of all 28 countries—to approve legislation of the tax. The special procedure requires at least nine EU member states to participate.

A previous FTT proposal, put forward in 2011, was foiled in the Council of Ministers due to opposition from countries led by the U.K., Sweden, Ireland, Luxembourg and the Netherlands.

Belgium

For the past year, Belgium has been the most outspoken of the 10 countries in insisting that the FTT would severely impact the nation’s pensions fund industry. In February, France offered two options for dealing with the pension funds industry, including an opt-out for the overall industry or a possible compensation for pensioners.

According to EU officials, ministers agreed March 20 on pursuing an overall opt-out for the pension fund industry.

“There are a number of countries that still have doubts and must consult their parliaments on the treatment of pension plans and other insurance instruments in relation to the financial transaction tax,” said Spanish Finance Minister Luis de Guindos, who spoke at a news conference after the March 21 Council of Ministers meeting.

“What we agreed on is that these three countries—Belgium, Slovenia and Slovakia—will consult their parliaments to see if they can join the consensus position that we have with the rest. If that were the case and we have the necessary number of countries to continue with the reinforced cooperation, the drafting of the directive would begin.”

Warning on Pensions Opt-Out

Guindos warned, however, that if the three countries agreed to continue and the FTT talks continue, the overall pensions opt-out could still present a hurdle to the deal.

“The opt-out generates complications from the point of view of the different instruments and from the point of view of other countries because situations of discrimination can occur,” Guindos said.

Cost Concerns

According to officials from both Slovakia and Slovenia, there are other concerns about participating in the FTT along with the impact on pensions funds.

“It is a big concern for Slovenia that the costs of implementing the FTT will be more than the revenue raised,” a Slovenian official, speaking on the condition of anonymity, told Bloomberg BNA March 21.

“We have to get another mandate from our parliament because the mandate we have now is based on the original commission proposal. And that proposal has changed considerably.”