The implementation of a European Financial Transaction Tax was proposed in Europe in 2010 following the failure of the G20 countries to agree on a transaction tax at a global level. The aim of the tax is to dampen excessive trading and to help recover some revenue for governments post the banking crisis.
However, unanimity from all 27 Member States is required in order to pass a European tax of this nature and a number of nations including the United Kingdom and Sweden have made it clear that they will not vote in favour. As a result, some countries have implemented or are in the process of implementing their own Financial Transaction Tax. Since October 2012 these countries have been working towards an enhanced co-operation for member states that wish to opt in and participate in the implementation of the tax.
The 11 states originally involved were: Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain. Together these countries account for about 90% of Eurozone GDP. Estonia withdrew support in December 2015.
Following political agreement on the details of the FTT in October 2016 between the 10 participating countries, a draft text was expected at the end of 2016, was pushed back to 2017, and has still not been delivered. The appetite for a harmonised, EU-wide tax has never been unanimously felt amongst the Member States, with the UK in particular voicing dissent.
Certainly, only a proportion of the Member States operating their own tax does theoretically not sit well alongside the new Capital Markets Union initiative which aims to create a common market with common rules.
Much of the news regarding the development of the FTT is from hearsay and individuals’ comments. We aim to keep track of true developments, which at present are not frequent.
At ECOFIN’s June meeting, concerns about impacts on non-participating EU member states are raised as a priority.
Co-operating finance ministers indicated they examining the French model for the FTT, and that the revenues from the FTT may be passed as a contribution to the EU budget.
Finance ministers from the participating Member States agree to negotiate the FTT based on the German and French finance ministers’ proposal. It is agreed that participating member states will share the generated revenue, rather than the German plan to contribute it to the EU budget.
Germany and France present a joint position paper to ECOFIN. It proposes:
If successful, the proposal will be voted on in 2020 for inclusion in the 2021 – 2027 EU financial framework agreement.
Finance ministers from Germany and France meet to discuss relaunching negotiations and to ensure that a FTT is achieved. The existing French FTT shall serve for the basis for the FTT plan.
In the light of the upcoming exit of the United Kingdom from the EU, Finance Ministers expressed concern regarding the impact that a FTT would have on efforts to attract banks and financial institutions away from London, post-Brexit.
Finance ministers from the co-operating countries are expected to meet to discuss further technical analysis of the impact of the FTT proposal on the real economy and pension funds.
Finance ministers from the co-operating countries meet to discuss technical issues of the FTT proposal. A key area for discussion is the exemption of pension funds, and whether member states should be able to have an individual “opt-out clause”.
European Commission were due to submit the first report (and proposals if required) to the Council of the EU on the application of the European FTT by the 31st December 2016. Subsequent reports to follow every 5 years. There does not appear to have been any progress as of January 2017, but for a pledge from the Commission to continue the work.
FTT is discussed at ECOFIN’s December meeting, in which “The president of the Council called for a draft legal text to be prepared to reflect recent progress”.
Delayed from September 2016, full agreement on the details of the FTT is reached at ECOFIN’s October meeting. A draft text is now expected from the European Commission by the end of the year.
|Full political agreement on all aspects of the FTT was expected, but instead the 10 co-operating countries’ finance ministers agreed to a compromise paper. Now two working groups are due to do preparatory work to determine key details of the tax by September 2016.
10 of the 11 countries (all but Estonia) reach partial political agreement on some aspects of the tax including:
Full political agreement on further aspects is due in a further 6 months time, by June 2016.
|Originally scheduled for Q4 2012, the European Commission is due to present a proposal defining the technical details to the Council of the EU; this is currently delayed whist the scope and definition of the FTT is still due to be finalised by the Council.
Following unanimous agreement from the participating states under enhanced co-operation, implementation will be made possible with the publication of the Financial Transaction Tax Directive in the Official Journal of the European Union.
The ECOFIN meeting discusses details of the tax; such as the rate of taxation, the products to be taxed and how to implement the tax.
Council of the EU’s finance ministers holds an informal ECOFIN meeting to discuss high-level details of the tax including exemptions.
Council of the EU’s ECOFIN council meets and discusses 2 out of 3 possible models for implementing the FTT. No final agreements were made.
Joint letter from the French and Austrian finance ministers is issued to the other 9 countries pursuing the FTT, in an attempt to break the stalemate thwarting the FTT’s progress. The letter proposed that the FTT should start from 2016 and apply at low rates to a wide range of instruments.
31st December is the third deadline for the finalisation of FTT proposals within the Council of the EU to be missed.
9th December 2014
Council of the EU’s ECOFIN committee meets to discuss the FTT proposal based on the Presidency of the Council’s State of Play report dated 31st October. At this point the State of Play progress report becomes public and it becomes clear that the FTT will be delayed for a third time.
The Council of the EU hold an ECOFIN meeting on 7th November, at which the Presidency emphasised the importance of reaching a final proposal for the FTT and issues and progress discussed.
State of Play by the presidency of the Council of the EU, states that compromise has still not been reached on key principles of the tax. The State of Play is dated 31st October but publicly released in December.
The Council of the EU’s Committee of Permanent Representatives meets on.
The Council of the EU’s Working Party on Tax Questions meets.
The Council of the EU’s Working Party on Tax Questions meets. At this meeting “collection methods and data requirements” were discussed, based on four options presented from an ongoing study by the European Commission.
|The final Financial Transaction Tax was expected to be agreed upon before the European Parliament elections in May 2014 but this date will not be met.
10 of the 11 the participating Member States reiterate their commitment to the FTT with a statement following their first discussion at ECOFIN. Slovenia did not include their name in the declaration. It states that the FTT will be phased in from 1st January 2016. The Presidency is now tasked with constructing a compromise proposal for future discussion.
European Court of Justice (ECJ) dismissed the UK’s legal challenge to the European FTT, which was originally lodged on the 18th April 2013. As the implementation of the FTT has not yet been agreed, the ECJ was unable to evaluate the UK’s challenge in regard to anything but the establishment of enhanced co-operation. Future challenges by the UK are expected.
|The Council of the EU’s Legal Service issued an Opinion to the European Commission that was not intended to be made public. The Opinion set forward that the inclusion of spot currency (FX) transactions in the FTT “would not necessarily be incompatible with the free movement of capital”, but such an amendment is outside of the scope of the current FTT proposal and would be required to be proposed anew by the European Commission.
1st January 2014
The FTT was expected to come into force on 1st January 2014 but is delayed as agreement was not finalised before the end of 2013. The EU Taxation Commissioner, Algirdas Semeta, has suggested that negotiations could be finalised in May 2014.
Council of the EU’s Working Party on Tax Questions – Indirect Taxation, met to discuss the FTT proposal and the Lithuanian Presidency’s technical issues for discussion in the absence of a compromise text.
The European FTT was scheduled for discussion at ECOFIN’s meeting on 15th November, but it was not on the final agenda.
Italy: First payment date for Italian FTT on 16th October, delayed from 16th July. Levies will be due for equity transactions between 1st March and 30th September and for derivative transactions between 1st and 30th September. The Italian FTT will subsequently due monthly.
Unmet deadline of 30th September for participating Member States to publish their new laws which are to take effect from the 1st January 2014. New deadline to be established with the aim of the FTT launching mid-2014.
FTT discussions resume in the Council of the EU as the Council’s Working Party on Tax Questions (Indirect Taxation) meets. This meeting includes all 28 Member States.
6th September 2013
The Council of the EU’s Legal Service provides their Opinion regarding the European FTT proposal. Their Opinion asserts that the FTT proposal “exceeds Member States’ jurisdiction for taxation”, “infringes upon the taxing competencies of non-participating Member States”, and “is discriminatory and likely to lead to distortion of competition to the detriment of non-participating Member States.”
Their Opinion is non-binding and was not intended to be made public. The European Commission’s Legal Service disagrees with the conclusions drawn from the Council’s Legal Service.
Italy: Financial Transaction Tax on derivatives and high frequency trading comes into force in Italy on the 2nd September, delayed from 1st July.
During the Plenary session on 3rd July, the European Parliament votes in favour of the European Commission’s text with the ECON Committee’s proposals by 522 to 141 (42 abstentions). Although influential, this vote is purely consultative as the European Parliament has no formal law making capacity on tax matters. The text and proposals will now be subject to scrutiny from the Council of the EU and subsequent revision by the European Commission.
European Parliament’s ECON Committee votes in favour of the European Commission’s proposed FTT Directive which included a new legal ownership principle, whilst recommending to relax the rates for trades in sovereign bonds and trades conducted for pension funds until 1st January 2017.
Council of the EU holds Working Party on Tax Questions – Indirect Taxation.
UK Government launches a legal challenge to the European Financial Transaction Tax with the European Court of Justice over concerns regarding the extra-territorial effects of the tax.
Council of the EU holds Working Party on Tax Questions – Indirect Taxation.
Italy: Financial Transaction Tax on equities came into force in Italy.
European Commission adopted the substantive proposal for a Directive implementing FTT under enhanced cooperation.
Council of the EU votes in favour of the proposed European FTT under enhanced co-operation between 11 EU countries.
Hungary: Financial Transaction Tax comes into force in Hungary on the 1st January.
Portugal: Portugal approved introduction of a FTT on the 1st January, which is expected to be implemented within the next 12 months.
|The European Parliament’s Economic and Monetary Affairs Committee (ECON) recommends that the European Parliament gives consent to the enhanced co-operation proposal.
European Parliament votes in favour of the proposed European FTT under enhanced co-operation between 11 EU countries (533 to 91 with 32 abstentions).
France: Grace period allowed for firms to comply with the ‘declaration system’ operated by Euroclear France ends on the 9th November; thus the first reporting and payment date for French FTT.
|The European Commission presents the proposal for enhanced co-operation proposal at the Council of the EU’s ECOFIN meeting. Deadline for the European Commission’s revised FTT proposal under enhanced cooperation.
|The European Parliament’s Economic and Monetary Affairs Committee (ECON) debates the proposal for a European FTT under enhanced co-operation and adopts the text.
On the 23rd October the European Commission gives backing for 10 countries to adopt FTT under enhanced cooperation and makes a proposal for a Council Decision.
Participating countries are Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain. Estonia is likely to follow once its Parliament has been consulted.
ECOFIN meeting takes place on 9th October at which 11 member states announce their commitment to the introduction of a European FTT. Through the enhanced co-operation procedure, Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain intend to make the FTT an EU law for participating countries. Next steps:
|German and French finance ministers ask the European Commission to move ahead with the FTT through the mechanism of “enhanced co-operation” as full support amongst the 27 member states could not be gained. Enhanced co-operation only requires 9.
France: First trade date of the 1st August for which FTT is in force. The first settlement date 6th August.
|Hungary: Parliament votes to adopt a financial transaction tax to come into effect in January 2013.
Council/ECOFIN debate on European FTT takes place on the 22nd June at which it is made clear there is insufficient support for EU-wide implementation. The procedure for enhanced co-operation is laid out, which requires support from at least 9 countries. Next steps: A request must be submitted to the Commission for enhanced co-operation and the Commission may submit a proposal to the Council.
|European Commission publishes seven explanatory notes on how the European FTT would work in practice.
Debate and vote on European FTT. European Parliament votes in a consultative capacity at Plenary in favour of the proposition of an EU-wide FTT, adopting ECON’s text by 487 to 152, and declares that it shall go ahead even if only in some member states.
|ECON committee vote on draft EU Parliament opinion.
|Council of the EU’s ECOFIN Committee debate the Commission’s EU-wide FTT proposal.
France: FTT passed into law through the Amended Finance Act for 2012.
|Letter sent to Danish Presidency stating support for EU level FTT by the Finance Ministers of 9 states (Austria, Belgium, Italy, Greece, Spain, France, Germany, Portugal and Finland). Denmark is opposed to the FTT but is politically required to take the request further.
|French Finance Minister announces France and Germany’s intention to implement a European FTT by 2013.
|Deadline for national parliaments to vote against the Commission’s proposals as per the 8 week “yellow card procedure”. The 18 votes required to force the European Commission to review the European FTT proposals was not achieved.
ECON Committee referral is announced in European Parliament’s Plenary session on the 25th October.
|Legislative proposal published by the European Commission for a Council of the EU Directive on a common system of financial transaction tax across Europe.
CRIS Committee mandate ends on the 31st July.
|European Parliament Plenary vote adopts the CRIS Committee’s final report.
|European Commission announces proposal to set up a European FTT as a resource for the EU budget in the ‘Council Decision on the system of own resources of the European Union’.
|Public consultation on financial sector taxation ends.
|European Parliament debates resolution on innovative financing at global and European level which includes a European FTT. The European Parliament votes at the Plenary session to support the resolution.
|ECON (Economic and Monetary Affairs Committee) gives support to the idea of a European FTT.
|European Commission launches public consultation on the taxation of the financial sector.
|European Commission and CRIS Committee exchange views on a European FTT.
Council of the EU receives ECOFIN’s report on a European FTT on the 28th October.
On the 20th October the CRIS Committee presents a mid-term report of recommendations to the European Parliament. This includes the introduction of a European FTT. The resolution is adopted by a vote. European Parliament asks the Commission to put forward a legislative proposal.
The Council of the EU’s Economic and Financial Affairs Committee (ECOFIN) approves report on the 19th October supporting the idea of a European financial transaction tax to go to the Council.
European Commission puts forward idea of a European FTT in a Communication on Taxation in the Financial Sector on 7th October.
|The Council of the EU issues Conclusions which call for the further investigation into European and global Financial Transaction Taxes by the Council and European Commission with a deadline for feedback of October 2010.
CRIS Committee mandate extended until 31st July 2011.
|European Parliament adopts resolution calling the European Commission to carry out an impact assessment of a European Financial Transaction Tax (FTT).
|During Plenary, the European Parliament approves a Resolution in which the European Commission and Council of the EU are asked to investigate the potential impact and benefits of an EU tax on financial transactions.
|Special Committee on the Financial, Economic and Social Crisis (CRIS) is created by the European Parliament to analyse and evaluate the causes, impact and extent of the European crisis. Given mandate of one year.
Sourced from European Parliament and European websites, financial and national newspapers and market practitioners.
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