EU Ministers Fail to Agree on Bank Tax

April 19, 2010 International Tax CooperationTaxation in EUTaxation in FranceTaxation in Germany

X. International Bertelsmann Forum 2006The highly debated issue of a new international tax imposed on banks has suffered a delay, after European Union (EU) Finance Ministers failed to reach a decision on how such a measure should be imposed, at a recent round of discussions.

In a meeting of EU Finance Ministers held on April 17th in Madrid, discussions were hosted on the possible implementation of an international bank tax. Upon closing of the meetings it was revealed that no conclusion was reached regarding bank taxes, as leaders could not agree to the exact nature of the tax. Currently, the biggest point of debate is the final intent for bank tax revenues. The discussion revolves around whether the money should be injected directly into a nation’s budget, or reserved as a fund for future financial sector bailouts.

Despite disagreements, EU leaders are bowing to public and political pressure and continuing to pursue a bank tax. Upon closing of the meeting Elena Salgado, Economic Minister of Spain, summarized the view of the EU Finance Ministers, saying “No decision has been made … We will have to keep talking about types of crisis resolution instrument.” Further international dialogue on bank taxes is expected to occur on April 24th, at a meeting of G20 Finance Ministers. It is hoped that the meeting will yield results to be presented before the G20 Leaders Summit in June.

In the face of delays and nations’ eagerness to instate a bank tax, Jean-Claude Trichet, European Central Bank President, warned that further discussions must be held and agreements met before any nation begins a course of action. At a press conference following the meeting Trichet explained, “We need proper sequencing…which will ensure that we have a financial sector that is resilient.” Leveling comments at nations like France and Germany, who have expressed a wish to instate bank taxes soon, he further said “absence of level playing field would be very damaging.”

Photo by Bertelsmann Stiftung