1. Bloomberg Businessweek
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EU Nations Split Over Transaction Tax After U.K. Files Challenge
By Rebecca Christie and Jeanna Smialek on April 21, 2013
http://www.businessweek.com/news/2013-04-21/eu-nations-split-over-transaction-tax-after-u-dot-k-dot-files-challenge
European Union efforts to create a hard-to-escape financial transaction tax are coming under fire from
within the bloc for overstepping the plan’s 11-nation scope.
Luxembourg’s Finance Minister Luc Frieden said he “cannot exclude” a challenge to the EU’s proposal
because of its impact on his nation and other non-participants. Last week, the U.K., home to the EU’s
largest financial center, went a step further and began legal action at the European Court of Justice to
guard against future economic damage.
The proposed levy could be collected worldwide as soon as the start of next year by France, Germany and
nine other EU nations that have so far signed up, if the effort stays on schedule. To stop traders from
escaping the levy by operating outside the tax’s zone, the EU plan invokes “residence” and “issuance” ties
to firms in participating nations.
“I’m not sure whether this project of an FTT in Europe will go ahead,” Frieden said at an April 20 panel at
International Monetary Fund meetings in Washington, referring to the proposed tax by its initials. “The
world can only grow if we have cross-border activities.”
Luxembourg’s renewed skepticism about the transaction tax follows its decision to begin the automatic
exchange of tax data in 2015, easing its bank-secrecy rules to coordinate with the U.S. and 25 EU nations.
The U.S. also opposes the EU’s transaction-tax proposal while signing off on an April 19 Group of 20
nations call that “more needs to be done” to fight tax evasion worldwide.
‘Patchwork’ Levies
The EU is trying to remedy what it sees as a “patchwork” of local levies and rein in speculative trading.
The transaction-tax plan would charge a 0.1 percent rate for stock and bond trades and 0.01 percent for
derivatives transactions, with some exemptions for primary-market sales.
Italy, one of the nations that has signed on to the effort, also has expressed reservations about the plan’s
impact on secondary-market sovereign bond trading. “Transactions on government bonds must be
excluded,” Italian ambassador Ferdinando Nelli Feroci told reporters in Brussels on April 19. This is a
“red line” for Italy and not up for negotiation, Feroci said.
The euro zone is facing two consecutive years of economic contraction as it grapples with a sovereign
debt crisis that so far has forced five of its 17 members to seek bailouts. Transaction-tax opponents say the
levy would raise sovereign borrowing costs and hamper recovery, while proponents say it would hold the
financial sector more accountable for the costs of crisis cleanup.
France’s Efforts
“We won’t stop our work and we won’t slow it down,” French Finance Minister Pierre Moscovici told
reporters April 20 in Washington, when asked about the U.K. challenge. The German Finance Ministry
said in an e-mailed statement it was “confident” the U.K. challenge wouldn’t succeed.
The EU estimates the tax could raise 30 billion euros ($39 billion) to 35 billion euros a year. To become

2. law, it has to be approved by the participating nations. The 11 countries that support the plan are Belgium,
Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia. All 27 EU
nations can sit in on the talks and have the option to join.
Dutch Finance Minister Jeroen Dijsselbloem said the Netherlands could still sign on to the transaction-tax
effort if the proposal is changed to lessen its effect on pension funds. He also said he was “sympathetic” to
the U.K.’s protest of the tax’s effect on non-participants.
Dutch Conditions
“The Dutch would still like to join that group” of nations seeking agreement within so-called enhanced
cooperation, he told reporters at an April 20 press conference in Washington. “Our conditions have not
been met.”
The current transaction-tax plan is based on a prior proposal that failed to win agreement among all 27 EU
nations. When the interested countries won approval to proceed under so- called enhanced cooperation
procedures, the U.K., Luxembourg, Malta and the Czech Republic abstained because of concerns about
how the tax might work.
“We remain confident that this decision was legally sound,” said Emer Traynor, a spokeswoman for EU
Tax Commissioner Algirdas Semeta, in an e-mail yesterday.
To contact the reporters on this story: Rebecca Christie in Washington at rchristie4@bloomberg.net;
Jeanna Smialek in Washington at jsmialek1@bloomberg.net
To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net
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