It has been reported that proposals have been put forward to introduce a restricted FTT focussed on transfers of listed securities.
It appears that the Austrian Presidency has put forward proposals to simplify and restrict the scope of the FTT being discussed by the remaining ten Member States considering the introduction of an EU wide FTT under the enhanced cooperation procedure (ECP).
In December 2015, an agreement in principle was reached on some of the main outstanding issues on proposals for an FTT to be taken forward via the ECP, followed in 2016 with the EU Commission being tasked with drawing up the legal text for a revised proposal.
Since then, there has been little or no progress and no word from the EU Commission concerning a further draft. Conflicts over the treatment of pension funds under the proposed tax appear to have undermined any progress as have, more recently, concerns over the impact of an FTT on attracting any banking and other finance industry business moving from London in the wake of Brexit.
Restricting the FTT
It now appears that a new proposal may be emerging for a very restricted FTT. Press reports suggest that the new proposal may be similar to local FTTs introduced by France and currently being considered by Spain. It would apply to:
- transfers of securities in larger publicly traded companies only
- the imposition of the tax may be linked to the transfer of ownership in the local trading venue
- derivatives and non-equity securities would be excluded from the scope of this new FTT proposal, and
- there may be a range of other exemptions, such as for intra-day transactions.
Such a proposal may stand a higher chance of being agreed by participating Member States by imitating domestic stamp taxes and avoiding some of the more controversial aspects of the original proposals. Indeed, there may be the possibility of extending this more limited version of the FTT beyond the existing ten Member States party to the ECP. However, previous suggestions of an FTT limited in such a manner ran into concerns by some Member States that they would not receive enough revenue if FTT is allocated to the participating Member States by reference to the location of the issuer of the equities. The proposed basis of allocation of a restricted FTT is not yet clear so it remains to see if previous allocation issues can now be addressed (perhaps by allocating based on the location of the trading venue rather than the location of the issuer).
Technical difficulties and differences over the scope of the original FTT proposal and, more recently, the opportunities offered by Brexit to attract foreign banks appear to have derailed the original FTT proposal. Whilst no one had actually had the courage to pronounce the FTT proposal dead, it seemed to have drifted into a long-term slumber from which it was perceived to be unlikely ever to awake.
The reports of the new proposal offer the prospect in many ways of the potential birth of a new, more realistic FTT, rather than a redrawing of the old. Whether the Commission is willing to totally give up on its original concept remains to be seen, but there can be little doubt that the chances of Member States reaching agreement on the reported new proposal may be significantly higher, and that it appears to be significantly less damaging than its previous incarnations.
For details of the proposed Spanish FTT, see “Spanish FTT: the Spanish Government publishes a first draft law”.
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