• Service: Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 5/28/2013

EU - UK challenges financial transaction tax (FTT) 

May 28: The Council of the European Union announced that the United Kingdom has initiated a judicial action seeking annulment of the Council’s decision authorizing enhanced cooperation with respect to the financial transaction tax.

The case filed before the Court of Justice of the European Union is United Kingdom v. Council, C-209/2013.

According to the EU release (23 May 2013) [PDF 67 KB], the position of the UK is that the EU Council’s decision is contrary to EU law (specifically measures under the EU treaty that any enhanced cooperation must respect the rights of non-participating EU Member States) and that:

  • The financial transactions tax (FTT) under enhanced cooperation will have “extraterritorial effects.”
  • The Council decision is in breach of EU treaty provisions providing that any costs resulting from the implementation of enhanced cooperation is to be borne by the participating EU Member States only.

KPMG observation

Such an action has been brought only once in the past, in the joined cases C-274/11 and C-295/11 (Spain and Italy v. EU Council). Spain and Italy challenged the Council decision to authorize enhanced cooperation between 25 EU Member States in the area of a unitary patent. The CJEU rejected all the pleas brought forward by Spain and Italy, and dismissed the action.

Note that Advocate General Bot’s comment (quoting AG Jacobs in C- 248/95) provides:

…it is important to bear in mind the limits of the Court’s power to review legislative measures adopted by the Council. Those limits arise from the fundamental principle of the separation of powers within the Communities. Where the Treaty has conferred wide legislative powers on the Council, it is not for the Court to substitute its own assessment of the economic situation or of the necessity or suitability of the measures adopted for those of the Council. By doing so it would usurp the legislative role of the Council by imposing its own views of the economic policies to be pursued by the Communities.

The CJEU can only perform a limited review of compliance of the Council decisions with the conditions for authorization of enhanced cooperation.

As further noted by the Advocate General, a review of the decision to approve enhanced cooperation must not be confused with a review of the act adopted based on enhanced cooperation—the latter can only be performed in the context of a separate action brought against that act, once it has been unanimously adopted by the participating EU Member States (which, concerning the financial transaction tax, they have not yet done).

For more information, contact a tax professional with KPMG’s EU Tax Centre:

Robert van der Jagt

Chairman, KPMG’s EU Tax Centre

Barry Larking

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