Photo: Jeff Djevdet

On the margins of the EU finance ministers’ meeting on 10 October 2016, the ten EU countries participating in the negotiations over a Financial Transaction Tax (FTT) made a decisive step forward. Belgium, or more precisely, the Belgian finance minister Overtveld, gave up his resistance against taxing all derivatives relating to public debt.

To the surprise of the other countries, in March 2016 Belgium had come up with demands for far-reaching exceptions for derivatives, which would have considerably watered down the project. The finance industry was already triumphant and mainstream media announced the death of the FTT.

However, there was strong pressure from Belgian civil society, which succeeded in scandalizing the blockade in the media and triggering a debate in the parliament. Although Overtveld’s party – the Nieuw-Vlaamse Alliantie, which is advocating the independence of Flanders – is the strongest member of the Belgian governmental coalition, proponents of the FTT prevailed in the end. As the host of central EU institutions, the potential damage for Belgium’s image if another EU project were to fail influenced the decision. In return, Belgium will probably be granted the exemption of pension funds from the FTT, which they wanted from the beginning. However, this will not substantially affect the tax.

There is now an agreement between the ten countries on the essential elements of the tax design. Some smaller items and the tax rate still need to be agreed upon. But it seems that this will not create major problems.

Civil society supporters of the FTT say that the compromise found in October does not meet all their expectations, but it does contain progressive components that would make it acceptable after all.

The EU Commission has been mandated to work out a new draft directive by the time the Council of Ministers of Finance meet in December 2016. If everything goes well, the final decision will then be made and the national ratification process can start in 2017.