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Government defends tax on financial transactions project

The government wants to keep campaigning for a tax on financial transactions despite the German government’s policy shift.

German Christian Democratic Union (CDU) Finance Minister Wolfgang Schäuble said earlier this week the attempts to implement such a levy in the European Union (EU) should be abandoned. Schäuble said there was a lack of support in some member states and claimed that the current circumstances made an introduction in the foreseeable future impossible.

The Austrian coalition of Social Democrats (SPÖ) and Michael Spindelegger’s People’s Party (ÖVP) made aware of the outspoken support of Germany, France and other influential EU members in its campaign for a tax on financial transactions in the past months.

Schäuble’s statements mean a significant setback for the Austrian taxation agenda due to the enormous weight of the German leaders’ opinion in Europe. Some analysts think that only the upcoming presidential election in his home country keeps French President Nicolas Sarkozy from following Germany on its new course. The conservative politician is accused of speaking out in favour of such a levy solely because of the strong support among people across the continent for the taxation measure.

Those in favour of the measure describe it as a possibly effective tool to regulate reckless stock market trading while more and more economic experts doubt such effects. They make aware of the possibility that financial companies relocate their operations as a consequence.

SPÖ and ÖVP wanted to rake in more than one billion Euros a year from 2013 or the following year by introducing a charge on stock market and business transactions. They controversially decided to consider the project in the latest savings package which has a volume of 26.5 billion Euros. The government could be forced to correct the pact’s details if its financial transactions taxation campaign flops.

SPÖ Chancellor Werner Faymann promised not to carry out a U-turn on the issue. He said yesterday (Tues) that his party would not shy away from something "only because Germany has a different opinion". ÖVP Finance Minister Maria Fekter justified the agreement to add potential earnings from a tax on financial transactions to the list of future incomes of the state. She said: "How could I abstain from speaking out for something on European level which I am in support of in interior fiscal debates?"

Fekter will attend a meeting of the EU’s finance ministers in Copenhagen, Denmark, at the weekend. The former interior minister is expected to issue another appeal for a tax on financial transactions in the Eurozone, the group of 17 EU member countries which use the Euro as their currency. Denmark currently holds the presidency of the council of the EU council.

The Austrian Greens announced yesterday they were generally supportive of the government’s attempts to introduce a tax on financial transactions in Europe while Federal Trade Union (ÖGB) President Erich Foglar warned the government to abstain from compensating the possible lack of tax revenues by jacking up value-added taxes (VAT). The SPÖ board member appealed to the coalition to reintroduce a tax on gifts and inheritances if the campaign for a tax on financial transactions turned out to be to no avail after all.

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