Updated | Malta reiterates opposition to EU's financial transaction tax

Malta has reiterated its position against the introduction of a financial transactions tax that is being proposed by the European Commission to generate around €57 billion in new taxation revenue, annually.

The Commission estimates that the total revenue from the proposed financial transaction tax for EU as a whole will amount to approximately 57 bn. € annually. However, the exact size of this estimate depends on market reactions and the risk of tax avoidance and tax fraud. About one third of this revenue is expected to be generated by taxing trading, borrowing and lending in securities (bonds and shares), and two thirds are expected to come from taxing derivatives.

Permanent representative to the EU Richard Cachia Caruana gave a short outline of Malta's position to Europe's finance ministers, and said Malta already had stamp duty on certain financial instruments and transactions.

"We're not at all convinced on the advisability of introducing a financial transaction tax on the lines proposed by the European Commission," Cachia Caruana said.

However, Malta is willing to explore the system of enhanced cooperation, which allows a minimum of nine EU member states to set up their own financial transaction tax.

"We are not against exploring this option, but a decision on this would be taken once the details of such enhanced cooperation are known," Cachia Caruana said.

In the light of views expressed by all member states, the presidency concluded that support for an FTT as proposed by the Commission was not unanimous. It also noted the support of a significant number of delegations for considering enhanced cooperation, which would allow a limited number of member states to proceed amongst themselves, making use of the EU institutions.

The presidency noted that formal requirements for enhanced cooperation would have to be met, and that next steps will be handled by the incoming Cyprus presidency.

According to the European Commission, the impact of the financial transactions tax, which would levy a tax on cross-border transactions, would be a negative 1.76% of the EU's total gross domestic product.

According to the Commission proposal there will be different tax rates on derivatives and other financial instruments of 0.01% and 0.1% respectively.

The Council also discussed a proposed directive on the taxation of energy products and electricity to align taxation more closely with EU energy and climate change objectives.

The presidency concluded that there was agreement amongst member states that minimum tax levels should be laid down in the directive, taking as their reference points the energy content and CO2 emission levels of energy products. But member states should retain maximum flexibility to determine the structure of their national energy taxes, and provisions on the principle of proportionality might have to be deleted.

Under the Commission's proposal, energy taxation would consist of two components: CO2-related taxation and general energy consumption taxation. The proposal revises the minimum level of taxation to reflect CO2 emissions and energy content, whilst ensuring consistency across various sources of energy (proportionality principle). It also seeks to reduce the tax burden on renewable energies.

In March 2008, the European Council called for a revision of the energy taxation directive to bring it more closely in line with EU energy and climate change objectives. The Commission presented its proposal in April 2011. The draft directive is also aimed at contributing to the promotion of employment and growth by encouraging member states to impose higher taxes on polluting energy products whilst reducing the tax burden on labour.

Based on article 113 of the Treaty on the Functioning of the European Union, the directive would require unanimity in the Council for its adoption, after consulting the European Parliament (special legislative procedure).