UK and International Tax news
Tuesday 23rd October 2012
The EC has just announced that the ten member states who wish to apply an EU financial transaction tax (FTT) through enhanced cooperation should be allowed to do so, because all the legal conditions for such a move have been met. This is the conclusion of the proposal for a Council Decision adopted by the EC. Moreover, according to the EC, enhanced cooperation on the FTT would not only bring “immediate, tangible advantages” for those countries that participate, but would also contribute to a better functioning Single Market for the Union as a whole, the proposal states.
In September 2011, the EC tabled a proposal for a common system of financial transactions tax, in the 27 member states, with the objective of improving the functioning of the internal market in this area. The tax would be levied on all transactions on financial instruments between financial institutions when at least one party to the transaction is located in the EU. The exchange of shares and bonds would be taxed at a rate of 0.1% and derivative contracts, at a rate of 0.01%. The EC estimated that this could raise €57 billion annually. It was proposed that the FTT should come into effect from 1 January 2014.
Following discussions, there was consensus at the ECOFIN meetings in June and July 2012 that unanimity would not be reached within a reasonable period. At that time already, a strong core group of member states expressed an interest in proceeding with a common system of FTT through enhanced cooperation.
On 28 September 2012, one year after the initial EC proposal, France and Germany sent a letter to Commissioner Šemeta, officially requesting enhanced cooperation to be authorised, on the basis of the EC’s proposal. This was followed by similar letters from Austria, Belgium, Greece, Italy, Portugal, Slovakia, Slovenia and Spain. A minimum of nine Member States are needed for enhanced cooperation to be allowed under the treaties. This minimum has been reached.
The latest proposal for a Council Decision must be adopted by a qualified majority of member states, and receive the Parliament’s consent, in order for the ten member states to move forward. Later in the year, the EC intends to table the substantive proposal on the harmonised FTT, for discussion and adoption by the participating member states. That proposal will be very much along the lines of the original FTT proposal tabled by the EC in September 2011. However, the EC will carefully examine whether some adjustments are required to reflect the smaller number of member states that would be applying it.
If you would like further information on the proposed FTT, please contact Keith Rushen on 0207 486 2378.Contact Us