UNIONE ITALIANA DEL LAVORO Sede Nazionale- Via Lucullo, 6 –
00187 Rome
EU Commission
PUBLIC CONSULTATION ON FINANCIAL SECTOR TAXATION
SUBMISSION FROM UIL – UNIONE ITALIANA DEL LAVORO
IDENTIFICATION OF THE STAKEHOLDER
Name and address of the respondent, relevant contact details (including email
address for contact)
UNIONE ITALIANA DEL LAVORO
Via Lucullo, 6 – 00187 Rome (Italy) – tel. +39-06-4753280/390
e-mail: – web
If you are registered with the Commission as an "interest representative" your
identification number
Are you a recognised European social partner organisation or a representative of a
European (sectoral) social dialogue committee
YES
Field of activity of the respondent. Please specify your field of activity. Please
indicate if you are directly affected by any of the measures and if so, which one and
to what extent:
TRADE UNION
If the respondent is an association of stakeholders, how many members do you
represent and what is your membership structure?
UIL is a national trade union confederation, with more than 2 million members; 14 sectoral federations representing workers in public and private sectors
- Do you object to publication of personal data on the grounds that such publication
would harm your legitimate interests?
NO
Do you agree to having your response to the consultation published along with
other responses?
YES
Preliminary remarks and executive summary
UIL is in favour of introducing a financial transaction tax (FTT) at European level, at a rate of 0.05%, which is an important step to acquire resources for the European Union. It must tax speculative transactions and not citizens or the productive economic system. The aim should be foster long-term investment to support economic growth and avoid possible repercussions on the social protection system and public finance, which are already burdened by the measures taken over the last three years to face the crisis.
It is also advisable for the introduction of this financial transaction to be the initial step conducive to a real European coordination of tax policies. A E.U. common tax policy would strengthen the political role played by the European Union and regulate financial markets; in the case of Italy, in particular, it would be a further incentive and opportunity to overcome the anomaly of a high level of tax evasion and tax dodging.
Q1: Do you consider it justifiable that the revenue side of fiscal consolidation efforts of Member States are targeting the financial sector?
Q2: Do you find it problematic that Member States introduce patch-work national measures without coordination?
Answers 1 and 2
UIL is favourable to introduce a financial transaction tax at E.U. level, which does not rule out measures by individual member States. In fact, the financial sector is important because it protects savings, which are a prerequisite for development and growth since they are the real goals to pursue. In this connection, a clear and accurate regulation at European level is of fundamental importance.
Responsibility for the crisis
Q3: Do you consider that shortcomings in the governance or behaviour of financial markets or financial institutions were one of the major reasons for the financial and economic crisis?
Q4: Which sectors and activities within the financial sector had to do most with the crisis?
Q5: Do you consider those shortcomings in the governance or behaviour of financial markets or financial institutions to be an EU-wide problem?
Answers 3, 4 and 5
Certainly the lack of adequate governance was at the core of the international crisis in which, for example, the banking sector played a key role. This is the reason why we think that this problem must be solved not only at European level, but rather with agreement at world level. We must respond to global capitalism with global governance.
Under/over-taxation
Q6: Do you consider the financial sector in the EU to be under-taxed (e.g. because of VAT exemption, exemption from thin capitalization rules, higher economic rent i.e. excess profits) or overtaxed (e.g. because of special additional taxes already implemented) with respect to other sectors of economic activity?
Q7: Which sectors and/or activities within the financial sector do you think are most under-taxed/over-taxed?
Answers 6 and 7
In Italy financial rents are subjected to a 10% lower taxation than the one applied to employment or pension incomes.
UIL asks to increase the level of taxation on financial rents, by excluding government securities.
With reference to VAT, we think that this tax should be revised, particularly the “soft” criteria applied to the banking sector.
Moreover, a significant obstacle to taxation is constituted by tax havens, a problem which could be solved only with a strongly coordinated policy at European and global levels.
Taxation as a relevant measure
Q8: What do you think of tax measures, versus regulatory measures and levies (connected to the financing of funds to ensure the proper resolution of financial institutions)?
Q9: Do you consider that an FTT or an FAT could lead to cumulative social and economic effects in combination with any of the ongoing regulatory reforms in the financial sector, including the banking levy (see COM 2010(301)final) ?
Answers 8 and 9
We think that the financial transaction tax must go hand in hand with the regulation of the sector. It is also important for the introduction of a new FTT not to negatively affect growth and employment.
Financial transaction tax (FTT)
Q10: At what level do you think that the FTT will be most effective?
Q11: Do you think that a broad based financial transaction tax is a viable instrument?
Q12: What do you consider as an appropriate connecting factor for the place of levying of the tax?
Q13: Do you think that the value set for the underlying is (in general) a correct tax base for derivatives?
Q14: Do you consider that there would be a risk of financial engineering around the broad-based or narrow-based FTT that would undermine the objectives of the measure?
Answers 10, 11, 12, 13 and 14
It would be preferable to have an effective FTT not only at European, but also at global level. Nevertheless, considering the practical difficulties of its introduction at world level, a European FTT is the right path to follow. The latter should be based on a wide taxable income since it would allow to introduce a low tax rate, which would have no negative effects on development and growth. It is extremely important for said tax to be conceived properly so as to avert the danger of its evasion or dodging.
FTT rate and exemptions
Q15: What do you think of the FTT designed as a cumulative tax, i.e. every subsequent sale is taxed at the full amount of the transaction without any deduction of previously paid FTT?
Q16: Would there be a need for specific exemption of certain transactions from the FTT or an exemption threshold?
Q17: Do you think FTT rates should be differentiated depending on the type of product traded?
Answers 15, 16 and 17
We think that the principle of cumulative taxation is correct and that we should envisage neither forms of exemption nor a differentiation of rates to ensure a simple system of taxation.
FTT impact on the economy
Q18: Do you think that the tax incidence of the tax will fall on the financial sector, or will it be shifted to the customers?
Q19: What do you think of the administrative costs related to the broad-based FTT?
Q20: What do you think of the effect on employment from broad-based FTT?
Q21: What do you think of the effect on small and medium enterprises (SMEs) from broad-based FTT?
Answers 18, 19, 20 and 21
It is likely for this tax to affect end consumers, since it is not an exception to the general rule. In this specific case, however, it is worth underlining that the end consumers are often the financial institutions.
We believe that the tax administrative costs are rather limited.
As to the tax effects on employment and small and medium size enterprises, we deem that a FTT cannot have a negative impact on employment. In fact, it is an increase of taxation that, due to the low rate and the number of subjects concerned (mainly financial operators), should not have an impact on the companies which generate employment. We also think that SMEs could benefit from said tax since many of these resources are reallocated by positively contributing to demand.
EU Commission Public Consultation on financial sector taxation – UIL April ‘11