A six-year push to impose a tax on financial transactions in Europe may have run its course, with Germany and France dragging their feet as they prepare for Brexit and a redrawing of the financial map that has already begun.
French Finance Minister Bruno Le Maire said earlier this month that Brexit could bring “thousands of jobs to Paris,” an opportunity that could be lost if the tax were imposed. His German counterpart, Wolfgang Schaeuble, said that “quite a bit speaks in favor of the French argument to look first at how the Brexit negotiations are going.”
With the heavyweight boosters among the 10 countries pursuing the tax getting cold feet, the plan’s future looks bleak.
“Some had said Brexit could prompt further interest” in the financial-transaction tax, said Dan Neidle, a partner at Clifford Chance in London. “In fact it looks like the opposite is the case. Brexit has prompted impressive efforts from the French and others to attract the financial sector -- those efforts would be completely undermined by the FTT.”
The European Commission, the EU’s executive arm, proposed the tax in 2011 to make sure the industry made a “fair contribution” after taxpayers bore the costs of the financial crisis. When some member states opposed the levy, a smaller group sought a compromise under “enhanced cooperation” rules. Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain are still at the table.
Finance ministers of the 10 nations haven’t met in months after they hit a snag over the treatment of pension funds. Other open issues include intra-group transfers, tax rates and collection methods, according to an internal document seen by Bloomberg. The scope of the tax also remains to be worked out, the paper states.
Governments have recently grown increasingly wary of pushing the tax while banks in the U.K. are deciding where to move staff to keep servicing clients inside the single market. President Emmanuel Macron’s new French administration has also changed gear and made luring firms to Paris a priority.
“Sure I want the tax, I just want us to take into account this change that is the U.K. exiting the EU,” Le Maire said. “And I want these decisions to be taken collectively.”
Schaeuble said the pause “doesn’t mean a suspension until the end of the Brexit negotiations, but one should be a bit more generous on the time horizon.” German politicians are already pushing to relax the country’s restrictive labor laws to make it more appealing to foreign banks.