BRUSSELS — E.U. regulators on Thursday defended plans to create the first international tax on financial transactions after business groups in the United States warned that the levy could break international agreements.
The plan, also known as a Robin Hood tax, aims to redistribute money generated by the finance industry, and could raise up to €35 billion, or $47 billion, a year for 11 participating countries, which include Germany and France.
The European authorities have promoted the rules as a way of penalizing the financial sector and returning some of the money that was spent on bank bailouts to citizens squeezed by austerity and the economic slowdown.
But the law is raising concerns in the United States, and in European countries like Britain and Luxembourg that are not participating, because the rules could increase the cost of transactions that involve institutions inside the taxed zone.
This week, the U.S. Chamber of Commerce and four powerful financial services associations warned Algirdas Semeta, the European commissioner drafting the rules, that he was proposing “novel and unilateral theories of tax jurisdiction” that were “both unprecedented and inconsistent with existing norms of international tax law and long-standing treaty commitments.”
In a letter to Mr. Semeta, the groups said “many transactions occurring within the United States that have no direct connection to Europe” would be subject to the tax.
A spokeswoman for the U.S. Treasury said in an e-mail that officials had raised concerns about the rules with their European counterparts. She said the Treasury did “not support the proposed European financial transaction tax, because it would harm U.S. investors in the United States and elsewhere who have purchased affected securities.”
Mr. Semeta said at a news conference on Thursday that the criticism was unfounded and that the rules were “fully compliant with international tax law” and based on principles “widely used in international taxation practice.”
The tax would create a significant new source of income amounting to about 1 percent of the participating countries’ tax revenues without placing a further burden on ordinary citizens, according to E.U. officials.
The levy would be based on a tax of 0.1 percent of the value of stocks and bonds traded, and 0.01 percent of the value of derivatives trades. That could mean revenues of about €100 million each year for small countries like Estonia and up to €10 billion each year for the largest participant, Germany, the officials said.
The officials said the law had been formulated so it did not prompt traders to drastically reduce their activities within the taxed countries or move away entirely. In addition, they said any negative effect on growth and jobs in participating countries would probably be canceled out by the recycling of the revenue back into the economy through projects like building new infrastructure.
But Alexandria Carr, a lawyer in London at Mayer Brown, said it was still possible that “we’ll see banks and businesses trying to challenge the rules, or even see them and governments in countries like Britain and Luxembourg outside the taxed zone take legal action at the European Court of Justice to narrow the scope of the law.”
Ms. Carr also warned that costs could be “passed to pensioners and savers, thereby failing to satisfy one of the main objectives of the proposal, which is to ensure financial institutions contribute to covering the costs of the current crisis.”
The 11 participating European states — two more than the minimum required for legislation to be drafted — still need to give their unanimous approval before the law goes into force, possibly at the beginning of next year, making it likely that lobbying against the tax could continue for months.
Article source: http://www.nytimes.com/2013/02/15/business/global/europe-rejects-critics-of-robin-hood-tax.html?partner=rss&emc=rss