The U.S. Treasury announced their opposition to plans by 11 European Union countries to impose a small tax on trades in shares, bonds and derivatives. The Wall Street Journal reports that the European Commission will propose a new financial-transaction tax, which has the potential to raise as much as €35 billion ($47 billion) per year for the 11 participating states, which include Germany, France, Italy and Spain.
Treasury Position on Taxing U.S. Firms
The new tax would effect U.S. Firms and other European states, including the U.K. and has the potential to transform financial-market flows in Europe. In an email to The Wall Street Journal, a U.S. Treasury spokeswoman said “We do not support the proposed European financial transaction tax, because it would harm U.S. investors in the U.S. and elsewhere who have purchased affected securities.” The announcement comes at a time when the E.U. and the U.S. made moves to launch a new push for broader free trade and investment agreements, and after several U.S. investment-industry groups came out against the planned levy.
European politicians and voters favor taxing financial trades, as they want to recoup some of the billions of euros they spent bailing out banks in the recent years. States that have tentatively signed up for the common levy include Belgium, Austria, Slovenia, Portugal, Greece, Slovakia, and Estonia –which account for about two-thirds of the E.U. economy.
Proposals outline a complex plan intended to prevent investors from relocating to avoid the tax. The levy, 0.1% for trades in bonds or shares, and 0.01% for derivatives transactions, would apply to both buyers and sellers as long as either of them is based in one of the participating states, or if the financial instrument being traded was issued in any of these countries. The commission wants the tax to go into effect on January 1, 2014, but first all participating states as well as the European Parliament need to unanimously agree.
In 2011, the European Commission wanted to introduce a tax for all 27 E.U. states, but the proposal was blocked by the U.K., Netherlands and others. After initial pressure from Germany and France, finance ministers in the E.U. allowed a smaller group of countries to continue with the levy last month. Nonparticipating governments gave up their right to vote on the final law.