Wednesday, November 27, 2013

Germany's likely new coalition goes for financial transaction tax

From Peter Wahl, WEED:

The coalition treaty between German Social Democrats (SPD) and Christian Democrats has been concluded. As far as the Financial Transaction Tax (FTT) is concerned, the relevant part reads (in my translation):
"We want to implement rapidly a broad based financial transaction tax in the framework of the Enhanced Cooperation Procedure in the EU. Such a tax should include preferably all financial instruments, in particular shares, bonds, investment certificates, currency transactions as well as derivatives. The tax should be designed in a way, which prevents tax avoidance. The effects of the tax on pensions, small investors and the real economy have to be assessed and negative consequences should be avoided, while undesired business models should be pushed back."
(Page 64).

As a first assessment I would say that the following points are positive:
1. they have now explicitly included currency transactions,
2. they want rapid implementation,
3. they address the avoidance issue,
4. they mention explicitly the regulatory dimension of the FTT ("undesired business models").

What could be problematic:
1. the mentioning of pensions and small savers points at issues, where they might compromise and accept exemptions,
2. the issue of use of revenues, which had been included in the draft of the sub working group on development has been kicked out in the final round (as we had expected).

Further procedure:
The agreement is not yet definitively adopted. The SPD will carry out a referendum among their members, which will be finished on December 12th. So things will be settled definitively only around December 15th.

Although there is quite a skeptical attitude among SPD members, they will in the end probably adopt the agreement.

The willingness of Berlin, to go ahead with the FTT is also underlined by a recent statement from Schäuble:
"The German government position continues to press for a introduction of the financial-transaction tax soon,” the ministry said today in an e-mailed comment to Bloomberg. “We continue to aim for a broad base combined with a low tax rate.”
For those who read German, the full text of the coalition agreement (185 pages) can be downloaded here.

Update 2014: for information on tax justice and the finance sector see here.

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