Maltese employers' representatives object to EU financial transaction tax

Maltese representatives of employers have voted against an Opinion of the European Economic and Social Committee (EESC) for the introduction of an EU wide financial transaction tax (FTT).

The EU is eyeing the FTT as one of the sources to generate income for the next EU budget. The Opinion of the EESC, authored by Italian member Stefano Palmieri, welcomes the proposal for the introduction of FTT as proposed by the European Commission.

The Opinion was approved at plenary with 144 votes in favour and 82 against.

Maltese members Sefano Mallia, and GRTU president Vince Farrugia voted against the Opinion. Mallia also proposed an amendment, which was defeated with 86 votes in favour and 139 against.

The amendment sought to bring the Opinion to clearly state that "that the different shares of the financial sector of each Member State relative to the whole economy indicate that the burden of this tax may not be shared equally among Member States".

Commenting on the Opinion, Mallia said it was unfortunate that the Opinion called for the introduction of the FTT on an EU wide scale, irrespective of whether such tax will be introduced on a global scale or not.

"If this were to take place there would be a serious risk of flight of the financial services sector to non-EU markets hitting employment and state income of EU Member States," Mallia said.

"This is especially relevant for those countries which have an important financial services sector relative to their national economy or indeed the European economy such as the UK, Luxembourg, Ireland, the Netherlands and Malta."

Mallia added that while the Opinion attempts to highlight the risks, it does not do this effectively.

"Of course the acceptance by Germany that the current proposed format cannot fly is a very important development and therefore we are yet to see whether things will move in the direction advocated by the EESC Opinion," Mallia said.

The EESC Opinion comes hot on the heels of a rejection of the same proposed tax by a number of EU finance ministers, now also including Germany.

The European Parliament is however in favour of such a proposal.

The strongest support for the FTT was shown by the trade union members, who traditionally view the tax as a way of securing a "fairer contribution" from the financial sector to the public finances of the European Union and to the national budgets of the Member States.

The strongest opposition came from the Employer Group members who view the FTT as an unsuitable tax instrument which, if introduced, could result in serious damage to the European financial sector.

The EESC Opinion states that one of the most significant effects of introducing the FTT would be to improve the sovereign debt situation. The increased revenue generated by the FTT would help to improve fiscal stability by reducing the need to increase debt levels still further. The effect would be direct for resources flowing to the Member States and indirect for resources going to the EU budget.

The Opinion also underlines the need to manage the negative macro- and microeconomic consequences of the legislative application of the FTT, so as to neutralise or at least reduce the risks and related costs.

For this reason, the EESC Opinion calls for appropriate compensatory mechanisms to be implemented in order to offset the more significant negative effects that the application of the FTT might have on the real economy.