EU Finance Ministers have failed to reach a consensus on proposals to adopt an EU financial transaction tax and to establish nationally-based ‘bank resolution’ funds to help bail out ailing funds in the future. French Finance Minister, Christine Lagarde may believe that this tax is “politically desirable”, but UK Chancellor George Osborne pointed out that “it is difficult to see how it would work”.
Taxand, a large independent global organisation of specialist tax advisors to multinational businesses, believes it is of such technical complexity that it will never get off the ground and Ministers should return their attention to the global recovery.
These political hot potatoes are too complicated to apply in the current economic landscape:
- A Europe-wide transaction tax would require a fundamental overhaul in country-specific tax policy, something that Member States will be keen to avoid in light of talk of a global double-dip recession.
- There are also concerns around increased tax avoidance and the disadvantage this would create for the European financial services industry in the global context, leaving European banks going into global battle with their arms tied behind their backs.
- There continues to be disagreement about the technicalities of a potential bank levy and how this would be played out, for example with foreign bank subsidies operating in different EU countries and all the arguments this brings with it on co-ordinated and impartial global banking, (and whether the proceeds should go to European funds or national budgetary needs.)
“We applaud the Ministers efforts to continue to work together on technical proposals and urge them to do this alongside the multinationals who are at the mercy of this political band standing and yet are facing ever greater administrative and compliance burdens and costs,” said Frédéric Donnedieu de Vabres, chairman of Taxand.
Inadvertently, the EU Finance Ministers have dealt another body blow to global tax harmonisation, neatly demonstrating the complexity and myriad of agendas at these and similar discussions, according to Donnedieu. “In the current global economy and with the fear of double dip recession, implementation of such global taxes seem to be light years away,” he said.
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