Very little has been heard of the controversial EU FTT since January 2015, when ten of the eleven participating Member States issued a joint statement reiterating their commitment to the introduction of a multilateral FTT. Other more pressing political issues have no doubt taken precedence, pushing the FTT into the shadows again, where financial markets would generally have been happy for it to remain. But there are now signs that a further push by the participating Member States may be imminent, with France and Austria reported to have mentioned “considerable progress” being made at a recent ECOFIN meeting and an agreement on “some of the core principles”. In addition, there are worrying suggestions that Germany may even wish to revisit the need for an EU wide FTT.
It has been reported that progress was made on the FTT at the recent EU ECOFIN Council meeting on 12 September 2015. The Finance ministers of the 11 EU Member States participating in the EU FTT apparently discussed the core features (such as territoriality, scope, tax base and exemptions) of the FTT, though there has, as yet, been no official press release or other official statement.
Nevertheless it is reported that agreement may have been reached, in principle, on several core features of the FTT, including the following:
- Scope: the FTT would apply to equities issued in one of the participating Member States, all derivatives (except derivatives related to government debt). Government bonds, fixed income bonds, repos/reverse repos would be outside the scope of the tax.
- Tax base: the FTT would be charged on the gross amount of equity transactions. For derivatives, it would apply to the option premium (for option-type derivatives) or term-adjusted notional amount/ market value (where available) for derivatives other than option-type.
- Collection: for equities, collection would be on an issuance basis, with possibly a residence based allocation of revenue from the FTT. For derivatives, a combination of residence, issuance and the counterparty principle may be applied (to be precisely defined),
- Cascading: all transactions in a chain would be subject to the tax, except agents and clearing members (when acting as facilitators).
Even so, it is clear that significant matters still require agreement, no least the rate that should apply and the definition of the market maker exemption. A technical group has a “clear mandate” to work through the remaining points, however.
It is reported that the EU Luxembourg presidency has scheduled a meeting of the EU 28 working group on the 29 September, where further announcements may be made. However, it is unlikely that there will be any firm announcements before the participating Member States can agree on the technicalities.
Nevertheless, the risk of progress seems greater now than it has since January, with France and Germany again pushing hard for progress. With significant technical details still to be worked out, however, the previously envisaged starting date of January 2016 is clearly no longer realistic.
Return to an EU wide FTT?
Separately, there are surprising reports that German Finance Minister, Wolfgang Schäuble, will again seek to push for an FTT on equity and bond trading to apply to in all Member States. However, with such firm opposition from the UK and certain other Member States, it seems hard to imagine what might be achieved by a return to proposals for an EU wide FTT, particularly when progress amongst even a limited number of supporting Member States has been so hard to achieve.
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