EU Commission backs up the financial transaction tax
Eleven EU Member States have asked the European Commission to introduce a financial transaction tax (FTT) within the framework referred to as enhanced cooperation. The Commission gave the green light on February 14, 2013, since all legal requirements for the project were met. The eleven participating countries expect tax income of 30 to 35 billion euros per year. In addition, the financial transaction tax should ensure a fairer contribution by the financial sector to the national budgets.
The plan is to tax all financial transactions that have a connection to the FTT territory. The so-called residence principle will be applied. This means that a tax liability arises when one of the parties to a transaction is resident in a participating Member State, regardless of where the transaction takes place. The countries that belong to the FTT space include France, Germany, Belgium, Austria, Slovenia, Portugal, Greece, Italy, Spain, Estonia and Slovakia.
The rates will be 0.1% for shares and bonds and 0.01% for derivative contracts. As the European Commission explained, in order to relieve strain on the real economy the FTT should not be applied to normal financial activities, such as, for example, mortgages, payment services, insurance contracts or deposits. In addition, the FTT should not be applied to the traditional investment banking activities related to raising capital or to financial transactions in the course of restructuring. Furthermore, the transaction tax does not apply to transactions with central banks and the ECB, the European Financial Stability Facility, the European Stability Mechanism and transactions with the European Union.
The enhanced cooperation procedure means that, while all 27 EU Member States will discuss the proposal for the FTT, only the participating states have the right to vote. For these eleven countries, however, the principle of unanimous agreement applies. The European Parliament must also be consulted. Furthermore, any interested Member State can join later under the same conditions as the states that participated from the beginning.
The EU Taxation Commissioner Algirdas Šemeta said, "With today's proposal, everything is in place to enable a common Financial Transaction Tax to be 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."