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EUROPEAN UNION

Germany breaks finance tax deadlock

Europe's finance ministers crawled towards a compromise on a disputed financial transactions tax Saturday, after a German plan to break a months-long deadlock on the issue won cautious support.

Germany breaks finance tax deadlock
Photo: DPA

Ministers effectively agreed to park a European Commission proposal for a wide-ranging EU-wide levy on the financial sector and consider Berlin’s plan to tax trades on company stocks and shares.

In a letter to his colleagues, German Finance Minister Wolfgang Schäuble acknowledged that his wish to see a wide-ranging tax introduced was unlikely in the face of British opposition and instead proposed “an intermediate step.”

“This would entail a tax payable on all transactions involving shares of corporations listed on a stock exchange, with the tax levied according to the place where the corporation has its registered office,” said Schäuble.

Such a move would be based on a tax already in force in Britain – stamp duty – added the Berlin proposal, making it harder for London to block.

The suggestion won broad approval, with French Finance Minister Francois Baroin deeming it “wise” and stressing that “we have to move forward on this issue.”

The finance minister of Sweden, which along with Britain, has been sceptical over a broad financial transaction tax, also showed a willingness to compromise.

“We have some differences of opinion,” admitted Anders Borg as he briefed reporters after the meeting. “We will try to work constructively to find something that is common ground for the whole of the EU.”

He stressed that the Commission’s proposal, which seeks to tax not only trading in company shares but also complex financial instruments like derivatives, should be taken off the table.

“It’s problematic for the recovery, for households and for corporates,” said Borg.

Danish Finance Minister Margrethe Vestager, who hosted the meeting as Denmark holds the rotating EU presidency, said ministers would focus “primarily on alternatives, because that’s where you find the most constructive atmosphere.”

Speaking to reporters after the meeting, Schäuble said that experts would come together to thrash out the remaining issues. “We made good progress,” he said.

“We agreed that if we maybe don’t reach the perfect solution of a broad financial transaction tax at a European level, because we need a unanimous decision for that, we should … intensively look at a working group,” he added.

“It is an important step in the right direction.”

The tax aims to make the financial services industry pay its way in the future after banks especially benefited heavily from taxpayer bailouts when the mortgage meltdown in the United States sparked the 2008 global financial crisis.

The Commission’s proposal from September has been strongly supported by nine countries, including European power couple France and Germany.

But Britain, home to 80 percent of Europe’s finance industry, has warned that it would prompt investors to flee the 27-nation bloc.

Despite the opposition, Baroin stressed the “determination” of the nine countries backing the introduction of a broader tax, describing it as “an essential political project for us.”

The German proposal insisted: “Negotiations on the Commission’s proposal for a common system of financial transactions tax (FTT) should not be abandoned or postponed.”

“I have not given up on the FTT,” stressed Schäuble.

AFP/hc

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EUROPEAN UNION

KEY POINTS: Is the EU really planning to double the price of Swedish snus?

Claims over the weekend that the EU planned to bring in a new tax which will nearly double the price of Swedish 'snus' tobacco led to the hashtag #Swexit trending over the weekend. But a commission spokesman stressed on Monday that the story was inaccurate.

KEY POINTS: Is the EU really planning to double the price of Swedish snus?

Where does the claim come from? 

The Aftonbladet newspaper on Sunday ran a story based around a “secret, leaked” proposal from the European Commission for a new excise tax on tobacco which the newspaper claimed would be presented at the start of next month, with discussion then taking place between various EU member states. 

The article does not name a source or quote from or show any parts of the document, but it quotes Patrik Hildingsson, the head of communications at the snus producer Swedish Match, who it says has “received the coming report”. 

What was the reaction? 

The story generated a near viral response on Swedish Twitter. The Sweden Democrats party jumped on the story, with the Twitter account for the party’s EU MEPs tweeting using the hashtag #Swexit, which then started to trend. 

According to Charlie Weimers, one of the Sweden Democrats’ MEPs, the commission is proposing a 12.5 percent increase in tax on cigarettes, a 200 percent increase in taxes on snus, and 500 percent increase in taxes on tobacco-free snus.

In a way, this is unsurprising as snus is used by about 17 percent of people in Sweden. The tobacco product is made by grinding up tobacco with flavourings and other ingredients and placing it in small bags which are pushed under the upper lip. It has been linked to a higher incidence of mouth cancer, but is much less dangerous than smoking. 

Why is snus sensitive for Sweden? 

When Sweden joined the European Union in 1995, it was granted an exemption from the ban on oral tobacco products the European Union had brought in back in 1992. Companies are allowed to manufacture snus in Sweden and sell it to their citizens, but they are not allowed to sell snus in other EU counties.  

Is it true that the European Commission plans to force higher tax on snus? 

Dan Ferrie, a European spokesperson on tax issues, told the EU’s daily press briefing on Monday that the commission’s coming proposals on tobacco taxation would not affect Sweden’s freedom to tax the product. 

“Sweden has had an exemption since it entered the EU when it comes to the sale of snus,” he said. “The proposal that we are working on right now is not going to change that situation because the sale of snus is not permitted outside Sweden. Sweden ill as a result continue to have full freedom to set its own tax rate and tariffs for snus.” 

Already on Sunday, Sweden’s EU commissioner Ylva Johansson said that she had stressed to the commission developing the new proposals the “unreasonable consequences for Swedish snus” if it were to force a higher tax rate. 

“My judgement is that this proposal has not yet been developed to the level where it can be proposed,” she said in an sms to Swedish state TV broadcaster SVT. “Tax questions require unanimity within the Ministerial Council.”

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