It will be recalled that in September 2011, the Commission published a proposal for an EU Financial Transaction Tax (“the FTT”). The FTT would be levied on transactions of shares and bonds at 0.1% and derivatives at 0.01% which were carried out by financial institutions where at least one of the parties to the transaction was established in the European Union.
The Rapporteur in the European Parliament on this proposal has now published a draft report in the ECON committee relating to the proposal. The report is generally supportive of the proposal, citing an externally commissioned report which shows that the FTT could have a positive effect on GDP of 0.25% rather than the minus 1.76% predicted by the Commission in its impact assessment. The draft report, however, includes some important amendments, including:
- the issuance principle: the FTT would be levied not only on transactions which involved parties resident in the EU but also any trades involving instruments which are issued within the EU and derivatives would be taxed by reference to where the underlying instrument is issued;
- legal enforceability: the report also includes a clause which renders the transfer of legal title unenforceable if the FTT has not been paid: instruments where no FTT has been paid will also not be eligible for central clearing under EMIR nor will they fulfil capital adequacy requirement under CRD 4;
- review clause: the report calls for the review of the FTT to examine both the scope of the tax and whether the rates of tax should be further differentiated for different assets classes; and
- enhanced cooperation: the report also calls for the possibility of a group of Member States to introduce a FTT under enhanced cooperation procedures if no agreement is reached on the FTT.