Financial Transaction Tax – progressive implementation proposed
Friday 9 May 2014
On May 4, 2014, the Hellenic Presidency of the EU presented a note, entitled "Proposal for a Council Directive implementing enhanced cooperation in the area of financial transaction tax".
The note outlines the status of the Commission's proposal for a Financial Transaction Tax (FTT) after discussions in the Council High Level Working Party (Taxation) on 14 April 2014 and Coreper on 30 April 2014.
In recollection in the autumn of 2012, eleven Member States (Germany, France, Spain, Italy, Belgium, Austria, Portugal, Greece, Estonia, Slovakia, Slovenia) introduced requests to the Commission to initiate enhanced cooperation. Based on the proposal from the Commission, after the consent from the European Parliament, and the Council's decision authorizing enhanced cooperation in January, in February 2013, a proposal for a Council Directive implementing enhanced cooperation in the area of FTT was.
After a legal challenge from the UK that was dismissed by the Court of Justice of the European Union (ECJ) on 30 April 2014, two Council Working Party meetings were held in order to clarify important aspects of the imposition of the tax and progress the discussions. The meetings are aimed at finding a compromise, which would be acceptable to all participating Member States and would take into account the concerns voiced by non-participating Member States.
At the meetings the following points were discussed:
- the interaction of the Proposal for a Directive on FTT with the current reform on the regulatory legal framework of the financial sector;
- clarifications on various aspects of the monetary policy of the Eurosystem and the possible interaction with the FTT that were provided by representatives of the European Central Bank, including on specific aspects of short-term financing instruments that could be taken into account in the final design of the tax;
- progressive implementation of the tax and the different options regarding the scope and the territorial application of the tax; and
- technical questions relating to the definitions and the scope of the Proposal of the Directive were discussed.
Based on these discussions, a compromise proposal was put forward regarding article 2 concerning the definitions and on article 3 concerning the scope of the tax.
Non-participating Member States brought forward arguments against the FTT highlighting:
- its too broad scope;
- potential economic consequences and legal issues relating to the imposition of the FTT;
- potential collection costs that would burden the non-participating Member States; and
- the rationale for many actors and types of transactions to be excluded from the scope of the tax.
Based on the foregoing, the current Presidency considers that a possible way forward would be to continue working on the progressive implementation of the tax, in order to gain experience with the new harmonized framework and notably, as far as its economic impact is concerned, before broadening the scope. Within that context, it could be envisaged that the work on the progressive implementation could focus on the taxation of shares and derivatives.
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