Maltese MEPs vote against financial transaction tax

With 487 votes in favour, 152 against and 46 abstentions, the European Parliament today adopted an EU wide financial transaction tax.

While the EU is eyeing the FTT as one of the sources to generate income for the next EU budget, the strongest opposition has come from the employer group members who view the FTT as an unsuitable tax instrument that, if introduced, could result in serious damage to the European financial sector.

Five Maltese MEPs have joined representatives of the Maltese employers to vote against the FTT.

According to the EP's opinion, the proposed financial transaction tax should be better designed to capture more traders and make evasion unprofitable. The EP also said that the tax should go ahead even if only some Member States opt for it.

The tax rates proposed by the Commission - 0.1% for shares and bonds and 0.01% for derivatives - are considered suitable and pension funds should be the only sector exempted from the tax.

Parliament has been calling for a financial transaction tax (FTT), for close to two years and the Commission tabled a legislative proposal for one late in 2011.  The latest Eurobarometer survey shows that 66% of Europeans favour such a tax.

"The FTT is an integral part of an exit from crisis.  It will bring a fairer distribution of the weight of the crisis.  This FTT will not lead to relocation outside the EU because the cost of this is higher than paying the tax," rapporteur Anni Podimata, a Greek socialist, said during the debate.

The resolution also raises the stakes to make evading the FTT potentially far more expensive than paying it.

Taking the UK stamp duty approach, the text links payment of the FTT to the acquisition of legal ownership rights.

This means that if the buyer of a security did not pay the FTT, he or she would not be legally certain of owning that security.  As FTT rates would be low, this risk is expected to far outweigh any potential financial gain from evasion.

While a number of exemptions were requested by MEPs, in the end the most substantive exemption was that granted to pension funds, which would see the tax waived on their transactions.