VIENNA (Dow Jones)--Euro-zone finance ministers have made a key commitment to work together for the swift introduction of a Europe-wide tax on financial transactions, the Austrian finance minister said Tuesday, urging European heads of states and governments to get behind the initiative.
Finance Minister Josef Proell denounced the idea of national taxes on financial transactions and dubbed the decision at a meeting late Monday by the Euro Group a "milestone agreement."
"We have agreed in unison to accelerate and further the work for an introduction of a Europe-wide financial transaction tax. The financial markets must also make a contribution to overcoming the economic crisis. This is a milestone towards the completion of this large project," Finance Minister Josef Proell said in a statement.
"I now expect the heads of states and governments to do their part to secure the implementation," Proell said.
His comments follow statements made in the Austrian media by Austrian Chancellor Werner Faymann, according to which the Austrian government leader is ready to implement a national financial transaction tax regardless of whether a Europe-wide agreement is reached or not.
"I consider it a mistake to pursue a solo solution, even before a European solution has been fought for," Proell said.
-By Flemming E. Hansen, Dow Jones Newswires
In English (Rasmussen):
PES: European Socialists call for tax on speculators - Conservatives hesitant
The Party of European Socialists. (PES) President Poul Nyrup Rasmussen welcomed the European Parliament.s decision today to call for a common EU position on a Financial Transaction Tax (FTT).
"The PES has long called for an FTT to curb the excesses of speculators. We are happy to see the European Parliament take this step despite resistance from Conservatives", said Mr. Rasmussen. He praised the efforts of Udo Bullmann MEP (S&D) whose amendments have given the resolution much needed backbone.
"It is for this reason that the PES is participating in a Conference organised by the Global Progressive Forum and the European Progressive Political Foundation FEPS , on 15 March (next Monday), a high level conference on why we need an FTT," stated Mr. Rasmussen. The PES leader will open the event with a live transatlantic link with US trade union leader, Richard Trumka, to illustrate the growing efforts for the tax on both sides of the Atlantic.
Mr Rasmussen gave his comments as calls intensified for the EU to support an FTT. Renowned economist Jeffrey Sachs, when asked today if such an action should be taken, stated that; "the EU is big enough to do this".
Mr Rasmussen.s comments follow the declarations of European Commissioner for Taxation, Algirdas .emeta before the Parliament Monday, who expressed a more hesitant position towards the introduction of a Financial Transaction Tax. The Lithuanian conservative tried to say that the tax would reduce EU competitiveness, despite the levy agreed by FTT advocates of only 0.05%.
The tax is currently being dealt with through the G20 process, with the IMF due to issue a report in April. However the PES is of the opinion that the EU can and should move forward and promote the idea on the global stage.
"A growing number of Head of States across Europe are calling for a Financial Transaction Tax. Mr .emeta could soon find himself alone with only speculators for company" said Rasmussen.
May 20, 2010 - 9:56 pm
Robert A. Green is a CPA and founder and CEO of Green & Company Inc. (GreenTraderTax.com and GreenTraderFunds.com), a publishing company, and Green & Company CPAs, LLC, a virtual tax and accounting firm catering to traders and investment management businesses.
Talk of a financial-transaction tax (FTT) has resurfaced yet again. This time, it was Germany.s governing parties calling for one in Europe. Germany is fed up with the E.U. PIIGS bailout and financial irresponsibility. Many German leaders blame investment banks for helping PIIGS cheat on their reported budgets and selling short. The governing parties want action against this irresponsibility, but unfortunately, they.re failing to understand that a FTT will worsen their market and it will be detrimental to their banks. A FTT will put small traders out of business overnight, and push those who do stay in business to other markets. It has the potential to increase unemployment and reduce liquidity in the markets.
Will it actually see the light of day? That remains to be seen, but there's a lot of anger now in Germany that surely won't stop it from happening. Germany.s frustration with the Greece bailout could propel it to usher in a euro tax with fiscal federal oversight. German taxpayers are footing the biggest bailout bill and want fiscal austerity, central budget review and compliance. They want this bailout money paid back, and a FTT may be the way to ease the frustration, despite its consequences.
True, the European Union could benefit from a federal euro tax, and it could very well move forward with this in the form of a FTT. But the entire G-20 shouldn.t be asked to follow suit. In addition, E.U. regulators have recently brought another troubling idea to the table: an E.U. fund passport that would impose rigorous E.U. rules on non-European fund managers. In my view, this is another bad idea that will hurt our marketplace.
The U.K. doesn't seem to have the power to block a FTT this time. Well, Gordon Brown.s U.K. could have slowed down unbridled German and French financial regulation, but the "new" U.K., the one that hasn.t participated in the Greek bailout, probably won.t be able to stop a FTT. I hope Treasury Secretary Geithner will stand firm on his opposition to a FTT and combat the E.U. attack on non E.U.-hedge funds.
There.s a lot going on in Europe right now. I.m fearful this meltdown is the real deal, but let.s hope the E.U. bailout succeeds. It worked in the U.S. Will it work in Europe, too? We shall see.
Tags: Angela Merkel, Bundesministerium der Finanzen, Financial Transaction Tax, Finanztransaktionssteuer, FTT, Germany, Timothy Geithner
20 may 2010
Europe's Finance Industry Regulations
London's Lobbyists Prepare to Return Fire
By Carsten Volkery and Michael Kröger
Hedge fund regulations, a tax on financial markets, a ban on naked short selling. The EU's bid to rein in the speculators has the financial industry up in arms. Lobbyists are already preparing to systematically attack the new proposals.
A day after the European Union outlined proposals to increase regulation of the financial markets, London's financial professionals are preparing a counter-attack. Some greeted the proposed regulations with contempt, others conjured up horror scenarios to campaign against the planned regulations.
"We are very disappointed by the proposals from Brussels," says Andrew Shrimpton, a partner at the leading London hedge fund consultancy Kinetic Partners. If the rules were really to be implemented then the sector would shrink massively, he says.
He was reacting to the announcement of several pieces of bad news for the financial industry this week. On Tuesday the German banking regulators BaFin announced that it was banning naked short-selling on government bonds issued by EU countries and naked credit default swaps. Chancellor Angela Merkel's ruling center-right government in Berlin said that it wanted to see a Europe-wide tax on financial markets introduced. And EU finance ministers, along with the Economic and Financial Committee of the European Parliament, voted for tougher regulation of hedge funds and private equity companies, despite objections from the British government.
The planned limits on hedge funds have provoked particular criticism in London, Europe's financial mecca. The industry there is particularly aggrieved as 80 percent of European hedge funds are based in Great Britain -- and many working in the City point out that Germany would not tolerate Brussels attempting to curb, for example, its automotive industry.
'Switzerland Is Waiting with Open Arms'
The ban on naked short selling has also been a cause for complaint. It was a knee-jerk reaction by the German government, says Manoj Ladwa of the Internet trading platform ETX Capital. "Angela Merkel's comments added fuel to the fire. They exacerbate the fears about the euro," he said.
The financial industry is threatening Europe with possible consequences. Half of all hedge funds in Britain are branches of US companies, says Shrimpton. "It really is an Anglo-American industry." The US managers will now be thinking about whether it is worth maintaining a London office.
Ladwa also claims that financial institutions in Frankfurt and London could be in danger if the EU regulates unilaterally. "Switzerland is waiting with open arms," he says. The danger is real, he insists, adding that he knows people who have already moved their company offices.
The threat is an old one. It belongs to the standard repertoire of traders and fund managers and is reiterated whenever higher taxes or stricter regulation are under discussion. The last time London's finance professionals threatened a mass exodus was in December 2009 after Gordon Brown's government decided to impose a one-time 50-percent tax on bankers' bonuses.
However, the great exodus didn't actually happen. Most of them stayed put.
That could be because there are other factors that are much more important when choosing the location for a company's headquarters. A survey by the commercial real estate agency Cushman and Wakefield showed that fund managers named proximity to international airports, local business infrastructure and access to well-educated staff as their top priorities. The financial metropolis of London beats Geneva hands down on all these points.
Trading of Blows
Yes, a few companies are establishing offices in Switzerland and other countries, but many are following the example of Blue Crest Capital: It recently opened a branch in Geneva with a staff of 50 but it still kept its headquarters in London along with its 300 employees.
It is unlikely there will be many companies moving this time either. What is likely is an even nastier trading of blows between the financial industry lobbyists and the EU. The two drafts by the European Parliament and the EU finance ministers on the regulations of the hedge funds are far from the final word. In the coming weeks, the two drafts must become one, and the British, via representatives in Brussels and finance industry lobbyists -- are going to try to overturn as many of the measures as they can.
In particular the European Parliament's draft, which is much tougher than that of the finance ministers, has come in for sharp criticism. Sources in the City say that it is clear that professionals were at work when it came to the finance ministers' proposals, whereas the European Parliament did not understand the material.
Both drafts contain suggestions that are "impractical and unworkable" says Andrew Baker, who heads the Alternative Investment Management Association (AIMA). That includes the idea of an EU fund passport. The proposal would impose strict EU rules on non-European fund managers but would leave the enforcement of the new rules to foreign regulators such as the US Securities and Exchange Commission (SEC). The lobby group is concerned that since these bodies will presumably refuse to work according EU law, US funds could be excluded from the European market.
The industry is also adverse to the limits on the investments that the European fund managers can execute in the future. That could squeeze profits and in the end European investors would bear the costs, AIMA warns.
Doubts About the Entire Approach
The lobby group is hoping that negotiations between the European Commission, the Council of Ministers and the European Parliament on the final text of the directive could see these measures scrapped. AIMA is relying on the member states to prevail over the parliament. The European Parliament draft is "disproportionate to the point of being punitive," and amounts to singling out hedge funds and private equity companies for special treatment within the financial sector. The finance ministers' proposals are "much more practical and realistic" AIMA argues.
In fact it is not just the lobbyists who have slammed the new financial regulations. Independent experts are also highly critical. "A step toward regulating hedge funds makes sense," says Hans-Peter Burghof, professor of banking and finance at the University of Hohenheim. The decisive flaw in the new rules, however, is that the hedge fund managers have to reveal their investment strategies. "That is like forcing Coca Cola to reveal its secret recipe." Innovation would be choked off, he argues.
Thomas Heidorn of the Frankfurt School of Finance and Management has doubts about the entire approach. In fact, no one really knows how much naked short selling with credit default swaps on European government bonds there has actually been, he says. According to the available data, there has not been a lot, he says.
And the EU Commissioner for the Internal Market and Financial Services, Michel Barnier, thinks the regulations could even be potentially dangerous. "The issue is extremely complex," he told financial daily Handelsblatt. Political mistakes could have "extremely serious consequences.
Financial Transaction Tax (FTT) is .simple, principled and do-able.
Richard Trumka, Poul Nyrup Rasmussen
Richard Trumka, Poul Nyrup Rasmussen
"A Financial Transaction Tax (FTT) is simple, principled and do-able", was the clear message from Party of European Socialists President (PES) Poul Nyrup Rasmussen. Mr. Rasmussen was speaking at a high level conference organized by the Global Progressive Forum (GPF) and the FEPS political foundation. The conference, "Fighting for a financial transaction tax -- how and why" saw over 100 progressive Brussels decision makers come together to generate momentum for the FTT concept.
Mr. Rasmussen added that; "Today, we are pressing for a global FTT -- it is a progressive way out of the crisis; it makes those responsible for the crisis pay towards recovery; It acts as a coolant that calms the worst excesses of speculation; and it allows us to begin to fill the huge hole in our public budgets".
Representatives from both sides of the Atlantic were there. Richard Trumka, the President of the AFLCIO, the biggest American Trade Union Federation, spoke from Washington by video link. He outlined the developments on the FTT in the United States. "He stated that the U.S. administration needs to find new revenues for job creation, the FTT provides this opportunity".
The participants acknowledged that the next big development was a report by the International Monetary Fund (IMF) on the feasibility of the FTT. Participants pledged their commitment to react should the IMF attempt to sweep the proposals under the carpet. The report is due in early April.
The Party of European Socialists (PES) has called for a .European Action Day. on 24 April to highlight the issue. PES activists all over Europe will hold events to highlight the need for an FTT.
The Action Day plans are part of a wider mobilization effort in the run up to the June G20 meeting in Toronto Canada.
in the USA: (via Wall Street Journal wsj)
By John D. McKinnon
John D. McKinnon reports on tax policy.
A tax on Wall Street financial transactions remains on the table, says an influential House Democrat who.s been talking up the idea among his fellow lawmakers.
This weekend, the trading tax took a step forward . and a step back . when U.K. Prime Minister Gordon Brown proposed it at an international meeting in Scotland, and U.S. Treasury Secretary Timothy Geithner appeared to shoot it down.
The plan already has won the support of France and Germany as a way to help offset the cost of future financial bailouts. Supporters also think a transactions tax could reduce market volatility. But Geithner said a "day-by-day" tax on transactions is "not something we.re prepared to support."
Back in the U.S., lawmakers who back the idea aren.t worried, and continue to discuss it, including with administration officials. "I know they [administration officials] are beginning to take a look at this in one fashion or another, too," Rep. Ed Perlmutter (D., Colo.), an influential member of the House Rules and Financial Services committees, said in a telephone interview on Monday. "I do think they are willing to take a look at some things..It.s one we.re going to continue to pursue."
A transactions tax is being discussed in the House as a way to offset the cost of additional infrastructure spending to stimulate the economy. It also could surface as a way to cut the huge federal budget deficit next year. Supporters of the transaction tax say it would apply broadly to all sorts of financial trading, including stock and bond sales as well as trading in derivatives. It wouldn.t apply to ordinary consumer transactions such as credit-card purchases.
Some Democrats view the idea as a matter of fairness, too. "We help Wall Street, [so] Wall Street can help Main Street," Perlmutter said. "There.s a huge sentiment within the country that there.s got to be some help at some level for the rest of the country."