Tag Archives: european
Germany And France Back European Tax Deal
http://www.ft.com/cms/s/0/bea8b704-a120-11e2-990c-00144feabdc0.html#ixzz2QpLM98JN By Madison Marriage Germany and France have thrown their weight behind the adoption of a framework that would facilitate the automatic exchange of tax information across Europe. The two countries are expected to publish a common position on a proposal to adopt an EU version of the US Foreign Account Tax Compliance Act as they attempt to fight tax evasion following high-profile scandals. This comes as Sven Giegold, the outspoken German MEP, plans to lobby the European Commission to adopt a directive that would bring a Fatca-style agreement into European law. Fatca, which will be implemented in 2014, will require asset managers and other European financial groups to pass details of US clients to tax authorities, resulting in higher reporting costs. German and French finance ministers have said they are ready to put in place similar measures. Pierre Moscovici, the French finance minister, and his German counterpart Wolfgang Schäuble issued statements on April 7 calling for greater tax information sharing across Europe in a move that would closely imitate Fatca. It followed an admission on April 2 by Jérôme Cahuzac, French budget minister, to lying repeatedly when he denied holding a secret Swiss bank account. Mr Cahuzac said he held €600,000 offshore, although reports in the Swiss press suggest the sum was as high as €15m. Mr Moscovici said in an interview with a French radio station that he proposed developing a “European Fatca” with automatic exchange of information. “In the next few days [France and Germany] will adopt a common stance to ensure we make real progress with this endeavour,” he said. Mr Schäuble also told the newspaper Saarbrücker Zeitung that Germany welcomes “every step towards” the automatic transfer of information. He added that the German government is collaborating with other countries on this. At the same time, Mr Giegold’s Green party will also propose a Fatca-style tax package to the Commission. The measures, including the automatic exchange of information between European member states, will be designed to curtail tax evasion by wealthy Europeans. The package will require non-EU financial institutions to provide European tax authorities with information on EU taxpayers’ earnings, which would “exert pressure on tax havens”, the Green party said in a statement. Mr Giegold, who won notoriety through his controversial bonus-cap proposal under Ucits V, says: “To ensure that our financial system respects national tax laws, we need a European Fatca now.” He believes Germany and France should take the initiative and lead a coalition of countries that are willing to take action. Florian van Megen, a tax policy researcher at the European Parliament and parliamentary assistant to Mr Giegold, says the Commission is already “seriously” considering adopting such an agreement. “The [Commission] has seen the US do it without waiting for anyone else – why not catch the same train?” he says. “If Fatca seems to work and compliance seems to be possible, it makes sense to have a similar international framework.” The proposed European tax package would go further than Fatca. Under Fatca, details of all US clients with assets over $50,000 must be passed to the US Internal Revenue Service. European groups in Fatca-partnering jurisdictions can meet their Fatca obligations with their local tax authorities. Several Fatca agreements have already been reached by European member states and the US, including the UK, France, Germany, Italy, Spain and Switzerland. Luxembourg is yet to broker a Fatca agreement with the US but it is said to be close to completing one. Luc Frieden, Luxembourg’s finance minister, recently said his country was ready to extend its collaboration with tax authorities abroad and would no longer reject the idea of an automatic exchange of information between countries. Keith Lawson, senior counsel in tax law at ICI Global, the international fund association, says it is unlikely a European Fatca-style agreement would increase costs for fund groups in Europe. He says: “If firms are already implementing procedures to identify the tax residency of investors under Fatca, it will be easy enough to [comply with a European equivalent]. “There would be no additional burden other than coding the account as UK, Spanish or German, as opposed to a US investor. “There may be some additional costs but these would not be overwhelming.” Last year the head of BNP Paribas’ investment solutions division said the cost of compliance with Fatca would reach €100m. This article first appeared in Ignites Europe, an FT publication Continue reading
A Fix For Europe’s Emissions Problem
http://www.ft.com/cms/s/0/329f0798-a762-11e2-9fbe-00144feabdc0.html#ixzz2QpKvqtJe The EU carbon trading scheme needs a serious overhaul The EU’s emissions trading scheme was supposed to bestow global leadership in tackling climate change. In practice, it has long been an embarrassment. A combination of industry lobbying and recession has so swamped the market with permits to emit carbon that prices have slumped and no longer impose any constraint on behaviour. Brussels has tried to bolster the market with half measures. But its bluff was called this week when the European parliament rejected a quick fix that would have propped up prices by postponing the auction of a big tranche of new permits. MEPs rightly refused to court personal unpopularity to no environmental purpose. Much deeper reforms are needed to rid the ETS of its flaws. One is the way that it imposes costs on the production, not consumption, of carbon. This creates bizarre incentives, resulting in the closure of industrial plants in Europe to make way for more polluting ones in Asia. Not only does this seem unforgivably self-defeating at a time when Europe is struggling for competitiveness; it is not even much good for the environment. European nations may be cutting carbon production, but consumption, when imports are counted, has been shooting up – something that spells more pollution, not less. In addition, the focus on production actually thwarts the development of the ETS into a global system – a vital necessity if companies are to be able to compete on equal terms. So first, a mechanism must be found to tax imports from countries outside the system. Second, European leaders need to agree longer-term targets for cutting emissions. Recession has made it easy for the EU to meet its current 2020 targets. A 2030 or 2050 target would help to convince businesses of the need for investment in “green” technologies. Third, the EU needs to deal with the overhang of permits, and find a mechanism to prevent it accumulating again. One idea is to set a time limit, say of three years, after which an unused permit would expire. Another would be to create an independent body with a mandate to achieve cuts of a certain level, taking account of the economic cycle. Whatever it does, the EU must find a way to end the system’s absurdities. If politicians cannot build a system that commands public confidence and creates a credible market, the risk of Europe moving to more coercive measures, or abandoning effective climate policies, will only increase. Continue reading
Expert View: What Next For The EU ETS?
17 Apr 2013, 17:00 Sarah Deblock and Bryony Worthington The European Parliament yesterday rejected backloading, a plan to withhold emissions permits from the European Emissions Trading Scheme (ETS) to combat oversupply in the market. So can the ETS recover? Two experts give their views. Without backloading, ETS reform may be undermined Sarah Deblock, policy director for European affairs for the International Emissions Trading Association Backloading is not new. First known as the set-aside proposal, the European Parliament originally proposed it as a solution to address oversupply in the market around two years ago. So why has the parliament now rejected backloading? In recent months, MEPs’ positions across the political spectrum have fractured. Yesterday, nearly 70 per cent of MEPs in the influential right-of-centre EPP group, 86 per cent of the European Conservatives and Reformists, and 40 per cent of the liberal ALDE group rejected the proposal. Just 19 votes out of a total of 754 swung the decision. The result has hurt political confidence in the emissions trading scheme. However, while the vote failed to provide a clear political commitment to the proposal for addressing the current oversupply in the EU ETS, it has also led to public assurances of those MEPs who believe in emissions trading and the need for structural reform, but who do not see backloading as being a necessary part of this process. Many of those MEPs opposed to backloading viewed it as a short term measure only, and did not support that type of market intervention. Therefore, as additional information emerges, most MEPs would argue that their opposition to the backloading proposal is not to be interpreted as opposition to the EU ETS. Moreover a majority of the anti-backloading camp is publicly supportive of reform. But although structural reform is likely to happen with or without backloading, it will be much harder to restructure the ETS if nothing is introduced to make the market more efficient. Backloading is also a way to buy time to avoid the carbon price collapsing further. Without it, the price of permits is likely to start rising and falling depending on speculation over political developments rather than market signals. And if MEPs begin new discussions on long-term structural reform in a context in which the ETS is working inefficiently, the discussions could get sidetracked from redesigning the scheme long-term in favour of a short-term fix. More time is needed for a meaningful reform so that the carbon market can automatically adjust when the economy takes a turn for better or worse. What’s worse, the political situation in Europe is likely to delay ETS reform. With the European elections taking place in May 2014, the new commission is not expected to be formally in place before early 2015. Once a new legislative proposal for reform materialises, it’s likely to take another year or two to get through the European Parliament and European Council. This delay means that without backloading, the ETS is likely to run inefficiently until at least 2016. This will increase the temptation for governments to implement alternative instruments like carbon taxes, even though most politicians would agree that an EU-wide policy instrument such as the EU ETS is more desirable than a patchwork of 27 different national policies. The time has now come to make a strong political commitment to the existing scheme, to acknowledge its difficulties, and to discuss the options on the table for reform. The outcome will also have an effect on the emissions trading schemes that are developing worldwide. Recent examples include Australia, California and the north-Eastern US states, which are starting to look to link to other carbon markets. Progress is also noticeable in the developing world in China, South Korea, Kazakhstan, and Chile. The EU ETS is the biggest emissions trading scheme in the world, and as it is facing challenges, all eyes are on Europe to see how it will address these difficulties. Member states must clarify their position to move the debate forward. The ETS will limp along, but Europe will pay for the delay to reform Bryony Worthington , director and founder of cap and trade campaign organisation Sandbag With the European Parliament’s vote against backloading, the future of the ETS in Europe the short term looks pretty bleak. The carbon price – already at rock bottom – has fallen by close to half. The immediate implications of this are that carbon auctions may struggle to go ahead if bids fail to meet reserve prices. EU member states that have been banking on incomes from carbon auctions to fund public services or supporting green policies will find they have a hole in their finances. This could prompt countries to follow the UK’s lead and introduce carbon taxes to compensate. If policies across Europe start to splinter, it will lead to distortions in trade – and that’s bad for business. The low prices also mean Europe’s most efficient businesses are no longer rewarded for doing the right thing, and those that rely on revenue from selling surplus permits will lose a potential lifeline. In the medium term, it is possible that a more ambitious proposal than the current ETS could emerge from one of the European institutions. A number of MEPs abstained, while several who rejected backloading have said they support fixing the ETS – just not through this measure. Both may support a different approach if one can be agreed. If nothing emerges ahead of the next parliamentary elections in May next year, it will be two years or more before anything can be done at an EU level. In the long term, the ETS will simply carry on regardless – there is nothing in the legislation that can cause it to cease. Prices will inevitably rise in around 10 years as industrial permit surpluses dry up, free allocations disappear and carbon offsetting provisions run out. Sadly for the EU, to sit around doing very little for the rest of the decade would lead to loss of investment. It would also send a very bad signal to other governments. For this reason, it seems likely the European Commission will now shift its focus to deciding climate targets for 2030. If targets come in at the same time as changes to the ETS, they could speed up a rise in the carbon price. Continue reading
