On 3 July 2013 the European Parliament voted in favour of adopting a legislative resolution on the Council Directive implementing enhanced cooperation in the area of financial transaction tax (FTT). The resolution, passed by 522 votes to 141 with 42 abstentions, amends the European Commission proposal of 14 February 2013 which is discussed in further detail in our earlier Law-Now.
Amendments of note include:
- the insertion of a new legal ownership principle which links payment of the FTT to the acquisition of legal ownership rights;
- the widening of exemptions to ensure that the impact of the FTT on less speculative trading activities of pension funds or those involving SME shares is reduced;
- provisions to allow participating Member States to apply a higher tax rate to riskier “over the counter” trades; and
- halving to 0.05% the tax rate for the trading of sovereign bonds and for pension funds trading stocks and bonds until 1 January 2017. Derivatives traded by pension funds would also be taxed at half the normal rate (ie 0.005%) until the same date.
It is up to the 11 Member States participating in the enhanced cooperation procedure (rather than the European Parliament) to agree on the final form of the FTT. We will be following developments closely.
The European Parliament has also called on the European Commission to demonstrate, through an impact assessment and cost-benefit analysis, that any enhanced cooperation will respect the competences, right and obligations of the non-participating Member States. It will be interesting to see what effect (if any) the impact of this analysis has on the current UK challenge to the adoption of the FTT using the enhanced cooperation procedure.