The European Union Affairs Committee of the Riigikogu (Parliament of Estonia) approved Estonia's positions on enhanced cooperation on the financial transaction tax at its today's sitting. These positions will be presented by Minister of Finance Sven Sester at the meeting of the Economic and Financial Affairs Council of the EU on 8 December.
Chairman of the European Union Affairs Committee Kalle Palling said that Estonia’s original aims were first of all connected with the collecting of resources to ensure the stability of the financial sector, and the possible using of the collected tax as the own resources of the EU. “By today, both the original aims and the goals set by the Commission, including broad tax base, have been abandoned. The financial stability aspect of the proposal is no longer relevant as the common crisis management fund, to which the banks contribute, has been established meanwhile within the framework of the banking union,” Palling said. “But the reduction of the tax base means that possible revenues will be lower than the possible administration expenses of tax collection and will not outweigh the risks of reorganisation,” Palling added.
“Today, four years later, we can say that the questions we asked then are still unanswered. From this I dare to make a conclusion that great enthusiasm has been replaced by pragmatism that is characteristic of the Estonians, and now it is preferred to analyse how it would be possible to achieve the same aims with the already existing means,” Palling said.
“The Government has confirmed that the original positions on the financial transactions tax, which were approved in 2011, are still in force, which means we do not support reduced tax base of shares,” said Minister of Finance Sven Sester, who participated in the sitting.
On 28 September 2011, the European Commission published the proposal for a financial transaction tax in 27 Member States of the European Union, but no agreement was reached on that. In 2013, after the debt crisis in Greece and other countries, 11 Member States decided to start negotiations on establishing a common system of financial transaction tax in order to ensure the fiscal sustainability of the Member States, increase the stability of the financial system of the European Union and to avoid distortions of competition between different sectors of economy. Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain are the countries that participate in the enhanced cooperation on the financial transaction tax procedure.
According to the original proposal, it was planned to collect taxes on all transactions carried out with financial instruments if at least one party of the transaction is located in the EU. The tax rate of transactions with bonds and shares would have been 0.1 percent and the tax rate of derivative contracts would have been 0.01 percent. According to the estimations of the European Commission, it would have brought the revenue of around 57 million euro per year. It was planned to impose the financial transactions tax on 85 percent of the transactions taking place between financial institutions; the citizens and entrepreneurs would not have been taxed directly.
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