On 31 October 2014 a Note from its President to the Council of the EU was issued drawing attention to the limited progress that has been made in relation to the FTT since the ECOFIN Council Meeting in May 2014. At the May meeting ministers of ten of the eleven participating Member States committed to finalising viable solutions for the FTT by the end of 2014 and implementing the FTT progressively, with the taxation of transactions in shares and certain types of derivatives being the “first step” by the end of 2015.
The Note includes proposals for:
- an exemption for transactions in listed shares of smaller companies which fall below a market capitalisation threshold calculated by reference to the Member State in question; and
- the ability for Member States to opt to tax transactions in non-listed shares of companies located in their jurisdiction (which would otherwise fall outside the FTT regime),
marking progress towards introducing the tax on share transactions initially.
However, the Note acknowledges no consensus among Member States on the types of derivatives which would fall within the FTT or on the application of the key “issuance” and “residence” principles in the collection of the FTT and in revenue allocation between Member States.
Since there does not even appear to be agreement on whether or not to tax equity derivatives (which one might expect proponents of the tax to envisage alongside the charge on share transactions), including any kind of derivatives within the “first step” as originally intended may prove to be problematic.
A number of critical issues concerning the design of the FTT regime therefore remain unresolved by the participating countries. It remains to be seen whether a viable proposal can be put forward by the end of 2014.
We have been closely following the development of the FTT since the second extended draft of the FTT Directive was proposed on 14 February 2013. Please find links to our previous articles below.