Germany’s curious charm offensive on City bank tax
The dastardly EU plot against the warriors of Britain’s economic interest – City financiers – took an unexpected turn this morning with an interview by Phillip Rosler, German Vice Chancellor, Economics Minister, and leader of Angela Merkel’s coalition partner, the Free Democrats.
In his interview with Rhenische Post (German), Rosler told the German newspaper about a plan to get Britain on board for some sort of EU-wide bank tax.
Until now, this has been presumed to be the much vaunted Financial Transaction Tax, also known as the Tobin Tax. We are awaiting the Franco-German policy paper on this within days, possibly before next weeks EU finance ministers meeting. Readers of this blog will remember the UK’s promise to oppose an EU-wide tax, unless it was global (basically a veto given US opposition). I published George Osborne’s impressive soliloquy against it in front of his fellow ministers in November.
In that, the Chancellor made very clear that Britain has a type of FTT already – Stamp Duty on share sales. Well, the German Economics Minister appears to have taken this at face value, saying: “We should think about whether we can get Britain on board” and that “if the British aren’t able to accept the FTT, then it makes sense to speak with other EU countries about the British model [stamp duty]”.
What is going on here? Two things. Firstly it does reflect German economic diplomacy trying to get Britain back into the fold after the remarkable veto in Brussels in December. Certainly, I’m told that any discussions about the single market by the euro-plus 26 gets referred back to the EU.
However there’s German domestic politics at play here too. Rosler and his party have been against the FTT proposal which emerged out of Paris, partly because it doesn’t include Britain. Financiers in Frankfurt are clearly alarmed that a unilateral FTT not including the City will simply hand huge amounts of business to London from Frankfurt and Paris. The proposal to morph the FTT into a UK style EU-wide stamp duty could neutralise that. It would have the advantage of appearing to be an EU wide harmonisation measure. It would probably hugely reduce the incidence, value, and scope of the financial tax. It would be quite U-turn for France and Germany, which only recently abolished their versions of stamp duty.
A cynic might say that VC Rosler was looking for a way to knife the FTT from inside the German government. But Chancellor Merkel’s spokesman today confirmed the German government was looking at this proposal.
What would it look like? A flat rate 0.5 per cent stamp duty on share sales raises £3/4bn per year in the UK. The existing EU Commission plan for the FTT is 0.1 per cent on the exchange of shares and bonds, and 0.01 per cent on derivatives. “This could approximately raise €57bn every year,” the Commission has said if applied across the 27 member EU, which will never happen.
So, how will Britain respond to these overtures? Coolly at first, it seems. Britain will not even contemplate that the revenues from such a tax would be earmarked for some supra-EU purpose (development aid, the environment, Euro bailouts, in the video above George Osborne memorably pointed out that proceeds had been spent four times already). But could the UK tweak the way in which stamp duty is applied or even its rate to allow a harmonised EU-wide tax. I doubt that too. But, if, for some strange necessity for unity Germany and other EU nations choose to adopt a UK-style stamp duty: Britain can hardly say “No”.
As Rosler put it: “We [Germany] have a special interest in including the UK”. This could get quite interesting. But it isn’t the result of a UK government initiative.
Follow Faisal Islam on Twitter: @faisalislam