Big step forward
In an important step forward, ten European governments have made major progress towards the creation of the world's first regional tax on financial transactions. This could have a big impact on funding for public services, as well as the fight against poverty and climate change.
On December 8, finance ministers of Germany, France, and eight other Eurozone countries presented a one-page document setting out substantial areas of agreement. While important decisions remain to be made, particularly on tax rates and use of revenue, the negotiators appear to have withstood strong opposition from the financial sector.
Last year, France, working in the interests of the country's financial industry, was pushing to water down the tax in two ways - by exempting trades in derivatives and by applying the tax only to the net value of securities transactions at the end of the trading day. These loopholes would have substantially reduced the revenue and regulatory benefits of the tax.
Happily, the bankers lost on both counts. In the Brussels-based meeting, the German Finance Minister Wolfgang Schauble championed the idea and was supported by his colleagues from France and Italy. The 10 governments have agreed to levy the tax on derivatives and all shares transactions and strengthened anti-avoidance mechanisms. Former EU Tax Commissioner Algirdas Šemeta has explained that with these mechanisms, "the only way to avoid it would be to give up all financial trading with those in the FTT-zone - a highly irrational response to a small tax, especially given the fact that the participating countries constitute two-thirds of the EU economy."
At the same time, German business and finance industry associations demonstrated the serious nature of FTT progress by firing off a blistering joint statement calling on governments to abandon the plan altogether. And Britain's finance minister George Osborne threatened to challenge the tax in the European Court of Justice if they went ahead (last time he tried this, the case was thrown out) – a threat we will fight if he tries to go through with it.
Osborne isn’t listening to the financial experts that support the FTT. Avinash Persaud, a former senior executive at several banks, including UBS and State Street, said that "getting so many countries to agree to an international financial tax is no mean accomplishment," welcoming the benefits the tax would bring for market stability.
By agreeing key elements of a broad Robin Hood Tax, country leaders and their finance ministers have listened to the people and ignored the banks, setting a new final deadline of summer 2016. European campaigners have welcomed what is being called an "agreement in principle," acknowledging that there is still much more to be done to secure a comprehensive, final deal. Whilst EU negotiators say they may not reach a final deal until mid-2016, they have overcome some significant hurdles and the finish line is in sight.
The FTT announcement raises hopes that the Robin Hood Tax could be an important new funding stream to help address poverty and climate change. France is already taking the lead: as his country hosted a huge climate conference, which saw 193 countries adopting a historic climate agreement, French Finance Minister Michel Sapin announced his aim to spend 100% of the money raised from a European Robin Hood Tax (estimated at €10-15) on fighting global poverty and climate change. This is a big step up from the French Parliament's commitment that, only last month, promised to spend 50% of its FTT on development and climate!
Spain and Belgium have also committed to earmark chunks of revenues for climate and development, a move which may help allay fears among some developing countries about the over-use of loans and private finance in the mobilisation of the promised $100bn a year by 2020. So far, $62bn (£41.3bn) has been raised for climate mitigation and adaptation (according to the OECD). But the figure includes loans, which must be repaid, and grants that only partly cover climate-related issues – and much of the public finance comes from existing and often stagnant development aid budgets. Countries of the Global South cannot afford the high costs of conditionality and repayments, nor should they be expected to.
For vulnerable countries already facing the effects of droughts, flooding and rising sea levels, adaptation to the affects of climate change is a top priority. Yet, Oxfam estimate that only $5-8bn in grants pledged to the $100bn target are targeting adaptation. With an estimated $800 billion required to help countries on the frontline of devastating climate change by 2050, it’s clear that proposals like the Robin Hood Tax are urgently needed. The countries with the greatest carbon footprints also happen to be those with the largest financial markets. The Robin Hood Tax would help ensure those with the biggest historical responsibility for climate change, pay their fair share to compensate those being hardest hit.
With France taking the lead, we need other countries to follow suit! Keep the pressure on European leaders for a strong FTT that delivers funds for people and planet!