EU finance ministers meet to settle bank taxes issue

European Union finance ministers met on Friday in a fresh attempt to agree on a common approach to taxing banks for the cost of crises although documents prepared by aides for the meeting showed agreement was unlikely.

Three years after the start of a banking and economic crisis, Europe is still grappling with the reform of its financial sector, and it remains unclear how its banks and financial markets will be governed.

The European Union recently waved through the creation of three new watchdogs to monitor banks, insurers and trading, a more far-reaching change than any being considered in Washington.

But the bloc’s 27 countries remain bogged down over how to impose levies on banks. Although many politicians want to tax banks more, they disagree chiefly over what should be done with the money.

“Rendering these different national systems of levies fully compatible … may prove to be a difficult task,” officials write, adding that any new national levies should remain flexible so as to broadly fit within a European framework.

Germany and Britain have been among the first in Europe to introduce a modest levy on banks. Berlin would also like a tax on financial transactions, such as the trading of company shares.

France is in favour of both although it would only support a transaction tax if the international community were to follow — a move seen as unlikely.

The three disagree, however, over what should be done with the money from a straight levy on bank profits. Germany is using revenue from its levy for an emergency fund while France and Britain want it for the public purse.

There are also divisions over whether banks should pay levies in their home country as well as foreign cities in which they operate. Repeated attempts to address this cacophony of differing approaches in Europe have so far led nowhere.

Sweden, which has its own bank levy but whose attempt to tax financial deals backfired when trading moved abroad, has warned against repeating its mistakes.

Source: Reuters

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