A compromise may be in sight to defuse the conflict over a proposed EU turnover tax for all financial transactions. It seems that finance ministers are looking at stamp duty on share deals as an alternative way of taxing the financial sector, perhaps marking a calmer phase in the evolution of European financial services legislation.
The argument over a Tobin-type tax has come to exemplify deep-seated antagonisms over the future of financial services within the European Union. For some Brits the proposed levy is seen as a weapon designed by others to undermine the predominance of the City of London; for many continentals, especially the French, it would deliver just desserts to a sector which is blamed for all the troubles of the world – and which could be a rich source of revenue (€57 billion is the Commission’s estimated take for its proposed turnover tax).
The French presidential elections will keep up the heat, and obviously there won’t be any resolution of the argument until well after May 6, when the rhetoric of the hustings should give way to a more pragmatic approach. Ministers plan to come back to the subject in June. The question then will be whether any form of financial tax could be introduced as an EU measure. The British would hate that, but might have to accept it as part of a compromise deal.
It is a testing time in the financial services sector as new rules take effect. The Prudential insurance company is threatening to move its headquarters from London to Hong Kong because of the requirements of the Solvency II directive, while the Bank of England deputy governor Paul Tucker argues that the directive, which comes into effect in 2014, will swamp national regulators and make it more difficult for them to spot big risks
The European Court has joined the fun. Its recent ruling outlawing gender as an element in fixing car insurance premiums and in calculating benefits such as annuities could be seen as just the sort of legalistic nit-picking which brings European law into disrepute. That’s certainly the view of the insurance industry and of many commentators who see the decision as “bonkers”, although to be fair it was foreshadowed in the 2004 anti-discrimination directive.
I suppose that Test-Achats, the Belgian consumer organisation which brought the case, assumed that if the Court ruled in its favour all premiums would drop to whichever level was lower, so the 22 year old male car driver would pay the same premium as his young sister and the woman in retirement would get the more generous annuity of her male colleague.
Be careful what you wish for! When the new rules come into effect in December 2012 the judgement is expected to trigger a general increase in insurance costs. Women will have to pay more for their car insurance despite the fact that they are generally safer drivers than men, while males will have to accept smaller annuities despite the fact that men tend to die earlier than women. Of course some premiums will come down, but not by much, and the overall effect is likely to inflate costs and reduce benefits.
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