EU unveils FTT details

The details of the Financial Transaction Tax (FTT) to be implemented under enhanced cooperation have been set out in a proposal adopted by the European Commission, reports Harris & Co chartered accountant. The proposed Directive mirrors the scope and objectives of the original FTT proposal put forward by the Commission in September 2011. The approach of taxing all transactions with an established link to the FTT-zone is maintained, as are the rates of 0.1% for shares and bonds and 0.01% for derivatives.

The countries that have signed up to the FTT are Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain.

Certain limited changes to the original FTT proposal have been made to take into account the fact that the tax will be implemented on a smaller geographical scale than originally foreseen. These changes are mainly to ensure legal clarity and to reinforce anti-avoidance and anti-abuse provisions.

Algirdas Šemeta, Commissioner responsible for Taxation, said:

‘With today"s proposal, everything is in place to enable a common Financial Transaction Tax to become a reality in the EU. On the table is an unquestionably fair and technically sound tax, which will strengthen our Single Market and temper irresponsible trading. Eleven Member States called for this proposal, so that they can proceed with the FTT through enhanced cooperation. I now call on those same Member States to push ahead with ambition – to drive, decide and deliver on the world"s first regional FTT.’

The UK remains opposed to the introduction of the FTT.

Julie Patterson, IMA Director of Authorised Funds and Tax, warns:

‘The UK is not one of the 11 countries which have signed up to adopt the tax. However, UK investors, pensions and funds will suffer the effects of the tax if they invest in securities from those countries, or if they undertake transactions with counterparts in those countries.’

‘Moreover, unlike stamp duty on UK equities, the tax will apply twice to every transaction – for the seller and for the buyer.’

‘It is important to ensure that the tax doesn’t hit every transaction multiple times where intermediaries are involved. It is not uncommon for there to be four or more intermediaries involved in a transaction, making what appears on the surface to be a 0.1% tax significantly more substantial.’

The proposed Directive will now be discussed by Member States, with a view to its implementation under enhanced cooperation. All 27 Member States may participate in the discussions on this proposal. However, only the Member States participating in enhanced cooperation will have a vote, and they must agree unanimously before it can be implemented. The European Parliament will also be consulted.

Further details are available from EUROPA.