FTT - where are we now?
There has been a great deal of public and private debate about the Commission’s proposals for an enhanced cooperation FTT on 14 February 2013 (PDF 186 KB)
There has been tension between the financial sector and wider business on the one hand and general public perception on the other. Public perception is that headline rates of tax at 0.1% and 0.01% can’t have a serious impact on transactions. The financial sector, with increasing support from other business sectors, and some areas of government, has been trying to explain why the impact of the tax as currently proposed would be unsustainable.
Expectations are now that the date for introduction will be deferred and the proposals to some extent amended – the question is, in both cases, by how much?
Some points worth noting are:
- The UK Government’s legal challenge
- The current draft directive is being debated in the Commission’s indirect taxation working party. This is a meeting amongst the EU 27 and last took place on 26 April. There appear to be significant disagreements amongst the EU 11 on the form of the FTT and very little progress has been made to date. The EU 11 are also meeting unofficially prior to the formal working party meetings. The EU 11 have asked the Commission to respond to a number of concerns and it is expected that the Commission will respond to these concerns at the next working party meeting on 22 May. Any response may not be public but past working party papers have found their way into the public domain.
- Non participating member states have also raised a number of concerns about the potential operation of the FTT by way of “non-papers” tabled for discussion.
However, there is clearly still political support for some form of FTT amongst the EU11, supported by the European Parliament.
Deferral does seem likely - later in 2014, 1 Jan 2015 or even 1 Jan 2016 are all possible dates. Significant delay might prompt certain member states (e.g. Spain and Portugal) to consider introducing unilateral FTTs. A phased introduction is also possible.
In terms of amendments to the Commission’s proposal substantial revisions are likely but there is as yet no clarity. The amendments being debated include financial instrument exemptions (e.g. Sovereign Debt), Financial Institution exemptions (e.g. Pension Funds) and Financial Transaction Exemptions (e.g. short term repos, intermediary transactions etc…).
The central assumption is still that the EU11 FTT will proceed, albeit on a delayed basis and with significant amendments.
The next step is for the Council of the European Union to formally adopt an agreed draft directive by a vote at the EU’s Economic and Financial Affairs Council (ECOFIN). Only the 11 participating member states are entitled to vote. The Parliament has to be consulted on the Directive, but does not need to approve it.
Given the lack of consensus, a vote is very unlikely in the near future (perhaps September/October at the earliest) – this timing presents difficulties given the German elections.
The Commission is expected to respond to the EU 11 concerns in relation to the draft directive at the working party meeting on 22 May. Any response may not be public.. The European Parliament continues to debate their report on the draft Directive (PDF 227 KB). A vote in the EP’s Committee on Economic and Monetary Affairs (ECON) is likely on 28 May with a full EP plenary vote due on 2 July. However, the outcome of any such vote will not be binding on either the Commission or the EU 11.