ACCA - The global body for professional accountants
The only circumstance where we consider an FTT could be supported is if it were agreed globally and, as a part of the implementation plan, other taxes were reduced
—Chas Roy-Chowdhury, head of taxation, ACCA

ACCA (the Association of Chartered Certified Accountants) hopes that EU leaders will be able to find a reasonable agreement on the long-term budget – the so-called multi-annual financial framework (MFF) 2014-2020- during the forthcoming EU summit that will take place in Brussels on 22 and 23 November

It is vital for the economic recovery of the European Union to successfully manage its budget reform and better target its priorities, such as for example enhancing the competitiveness of EU enterprises - especially small businesses, the backbone of our economy - as well as growth and job creation in Europe.

The global accountancy body warns against the risk of unfunded contingency plans to the MFF, and against the alternative approach of setting national annual budgets based on 2013 spending with a two per cent increase for inflation. This would be very complex to implement and would risk endangering legal certainty linked to funding for multi-annual EU projects. In addition, a failure to reach agreement on the MFF may risk progress on other crucial issues such as reinforcing the Economic and Monetary Union.

Petros Fassoulas, head of public affairs and policy-Europe at ACCA stresses: 'The MFF is an important instrument for investment and growth throughout the EU. It offers long-term financing for cross-border projects, something that national budgets are unable to do. Forty-eight per cent of the new seven-year EU budget will go to measures promoting growth and ACCA wants to see as many funds as possible invested to assist SMEs across the EU to take full advantage of the Single Market and create jobs.'

Estimates for 2009 are that the number of people employed was 5.6 million higher as a result of EU cohesion spending from 2000 to 2006. GDP in the EU-25 has been 0.7 per cent higher in 2009 due to EU cohesion policy investments during 2000-2006. This is estimated to rise to four per cent by 2020.

'The EU should continue focusing its spending in areas that can produce such results,' Petros Fassoulas adds.

ACCA nevertheless recognises that the stumbling blocks will not be easy to remove, and that some proposals entailed in the compromise prepared by Mr Van Rompuy would be difficult to put in place, especially given the current pessimistic economic outlook.

More particularly, we do not share the view that the financial transaction tax (FTT) should become the base for a new 'own resource' for the EU budget, despite the fact the idea could have some merits if it was applied at global level. As it is currently designed, ACCA believes that it  fails to pass the tests of both the feasibility and the impact on competitiveness.

Chas Roy Chowdhury, head of taxation at ACCA, says: 'The Financial Transaction Tax is also known as the Tobin Tax. The IMF was asked by the G20 in 2009 to consider the FTT but considered it inappropriate as a tax in the modern financial environment. This was the correct decision to take, especially in the light of the experience of Sweden, which implemented a FTT in 1984 and then repealed the tax in 1990 as it suffered a serious exodus of financial institutions.'

Chas Roy-Chowdhury explains: 'We are concerned that implementing such new tax would risk causing job losses and business insolvencies where the tax is implemented, and do not believe that it is the right time to do so when EU citizens and enterprises are already seriously hit by austerity plans. If eleven EU members wish to implement the FTT then they must do so in a way which does not “taint” securities and derivatives which pass through their jurisdiction or are incidental FTT attributable to an associated company in a non-FTT member state. 

'The only circumstance where we consider an FTT could be supported is if it were agreed globally and, as a part of the implementation plan, other taxes were reduced,' Chas Roy-Chowdhury concludes.