Pensions stumbling block for FTT?

Press reports suggest that disagreements over the treatment of pension funds under the FTT proposal risk the future of the proposal.

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Press reports suggest that support amongst the ten remaining participants in the EU’s enhanced co-operation procedure (ECP) to introduce a financial transaction tax (FTT) is crumbling. Conflicting approaches to the treatment of pension funds under the proposed tax appear to be undermining any progress and it is suggested that Belgium and Slovakia may be close to withdrawing from the process. This would leave insufficient Member States to progress the proposal further under the ECP process. This is welcome news for the financial sector that the risk of the FTT being implemented appears to be receding once again.


Proposals for an FTT to be taken forward via the ECP appeared to have all but stalled in 2015 with little or no progress being made. However, despite the withdrawal of Estonia from the list of participating Member States, a December 2015 meeting saw an agreement in principle on some of the outstanding issues reached.

The deadline of June 2016 for further progress was, however, missed and a state of play report prepared for the EU Council and published in June 2016 highlighted this lack of progress, However, Finance Ministers of the ten participating Member States met in Luxembourg during October 2016 resulting in an agreement in principle to progress the FTT, with the EU Commission being tasked with drawing up the legal text for the proposal.

The sound of silence

Despite initial enthusiasm from the EU Commission at the prospect of advancing the FTT, there has been nothing but deafening silence from the EU Commission since. Recent press reports now suggest that one of the main sticking points is the treatment of pension funds. The task force working on possible exemptions for pension funds has, apparently, failed to come up with a solution that satisfies all the Member States involved and Finance Ministers meeting on 21 February 2017 in Brussels have put back any decision on the issue. Further technical analysis is to be carried out before another meeting taking place at the end of March 2017.

It appears that Belgium and Slovakia, in particular, require pension funds to be exempt from the FTT. However, a general exemption for pension funds would also have to be extend to insurance companies and there are concerns that exempting insurance from the FTT would mean that the revenue raised is too small to justify it and give the insurance sector undue advantage over the rest of the financial industry.

Frustration on the part of those still hoping to implement the FTT at this lack of progress can be seen in a recent written question from the European Parliament to the EU commission on the FTT, which asks inter alia why progress has stalled.

The bigger picture

These technical difficulties in the detail of the FTT are compounded by the fact that other Member States are concerned that introducing an FTT now risks their chances of attracting any banking and other finance industry business moving from London in the wake of Brexit. These concerns also appear to be undermining support for the FTT.

The ECP procedure requires a minimum of nine Member States to progress and with only ten Member States currently supporting the process, it would only take two more to back out for the ECP process to totally run aground.


It now appears as if the much-heralded breakthrough in October 2016 may have been something of an exaggeration. There clearly remain significant differences amongst the Member States involved on points of detail, which put the future of the FTT on shaky ground. There may still be a veneer of political support for the FTT, but questions are starting to be asked again about whether there is really the will amongst the remaining Member States to make the compromises necessary to make the FTT a reality. This provides a welcome indication for the financial sector that the risk of the FTT being implemented appears to be receding once again. Even if the ECP process failed because the number of participating Member States dwindled below nine, in theory it would still be possible for the remaining Member States to coordinate introduction of an FTT in common form in their respective jurisdictions via their domestic legislation wholly outside the EU framework. However, so far there has been mercifully little indication that this would be likely, as political will for the FTT gradually drains away.

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