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25 June 2013

Financial Transactions Tax to be delayed at least six months


A plan by 11 European Union countries to slap a tax on financial transactions will be delayed by at least six months, as participating governments fail to agree on key aspects of the new levy.

France, Germany and nine other EU countries are pushing ahead with a proposal to introduce a sweeping levy on share, bond and derivative trades, after discussions for an EU-wide financial-transaction tax broke down last year.

The tax was supposed to enter into force on January 1, 2014, according to a proposal in February by the European Commission, the EU's executive body. But in an update on its website, the Commission said the financial transactions tax "could still enter into force towards the middle of 2014", provided that "agreement is found before the end of 2013, and there is a speedy transposition into national law by the participating Member States".

The delay represents a victory for the financial services industry, which has lobbied fiercely against the plans. The UK government has launched a legal challenge against the proposal, amid fears it would be expensive to collect and risk driving business away from London.

The tax aims to discourage speculative trading and ensure that the financial sector pays back part of what it received from taxpayers during the financial crisis. Under the Commission's proposal, a 0.1 per cent levy would apply to share and bond trades and 0.01 per cent to derivative transactions between financial institutions, if at least one party was located in the EU.

However, governments appear to be increasingly concerned about the impact of such a sweeping tax on Europe's still-weak economy and sovereign bond markets, as well as on pension funds and personal savings. Despite a series of meetings this year, the 11 states remain divided on fundamental issues, including the scope of the tax and how to distribute the revenue, EU officials say.

Full press release



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