Finance minister sticks to his guns on Tobin tax

During the meeting of the Economic and Financial Affairs Council (Ecofin) held today in Brussels European finance ministers held discussions on the proposed financial transaction tax and the situation in Hungary.

During the meeting, the financial transaction tax proposal was discussed and finance minister Tonio Fenech, expressed his opposition to the tax because "the introduction of this tax will create additional burdens for smaller member states in the enforcement and collection process, to the extent that the net revenues will not be worth the distortion to the economy that this tax will cause."

Fenech told MaltaToday that in Malta's case "the costs of such a tax outweigh the benefits" and would put Malta at a "competitive disadvantage." He said that the position of member states remained the same after no progress was achieved in the discussions.

Malta is one of three countries opposing the tax, together with the UK and Sweden. If the proposal goes through member states will start imposing a tax of 0.1% on trading of shares and bonds, and 0.01% on derivatives transactions. However, the tax will not be in traduced unless all 27 countries unanimously agree.

The majority of EU countries, including the bloc's powerhouses France, Germany and Italy are supporting the introduction of the tax which is also known as the Tobin tax.

The European Commission is now expected to present a deeper analysis on the impact of the introduction of the Tobin tax on the European economy hoping to bring the opposing member states on board.

The finance ministers also discussed the state of public finances in Hungary, which has failed to meet its obligations under the excessive deficit procedure which is aimed at ensuring that member states' public deficit does not exceed 3% of GDP. Hungary has been fined €500 million, which will be deducted from the cohesion funds the country is due.  

Fenech said that Hungary has been given three months time to make amends and bring its economy in line. If Hungary manages to get its finances in order, the commission will consider whether the sanctions should be lifted.  

The Ecofin meeting was preceded by a meeting of the Eurogroup, which was held on Monday. The meeting discussed the situation in Greece following the country's efforts to meet all of the requirements qualifying it for €130 billion in financial assistance under the second adjustment programme for the country. The economic and fiscal situation in Spain was also discussed.