Negotiations for the European Union’s next budget grind on, and alas: One old idea getting a new hearing concerns a financial-transactions tax. Berlin and Paris think now is finally the time for this idea, which embodies so much of Europe’s fiscal problems.
German Finance Minister Olaf Scholz and French counterpart Bruno Le Maire are working toward a proposal to expand France’s existing finance tax to more corners of the EU, the Suddeutsche Zeitung newspaper reported Monday. The French levy is 0.3% for the purchase of shares in French companies with a market capitalization above €1 billion. A Europe-wide version might exclude some of the derivatives transactions the French tax captures, although details are scarce.
Some leaders have wanted a tax like this for years, and after repeated failures they may finally succeed. The financial tax is one of only two big ideas for generating new revenue for the expanded EU or eurozone budget that France and Germany are considering. The other big idea, a digital tax on American tech-giant revenues, is collapsing. Simply spending less, either at the EU or the national level, is never an option for these folks.
Never mind that a finance tax would be an own-goal amid Britain’s impending departure from the EU. Some Continental leaders are desperate to woo financial firms displaced from London during Brexit. They argue that Britain imposes a financial tax in the form of a stamp duty, so they won’t suffer a competitive downside. But the U.K. can get away with its tax, for better or worse, because the rest of its financial regulatory regime works for investors. The EU wants to layer a new tax on top of its current competitive disadvantages.
This is Europe’s fiscal problem in a nutshell. European leaders have never met a tax that they didn’t want to impose. They focus only on how much extra revenue they can extract from the private economy, ignoring the damage to growth and investment. If this is the budget debate Europe is going to have, voters would be wise to ask if a more extensive EU or eurozone budget is worth having.