10 of the 11 Member States currently signed up to participate in the introduction of an EU Financial Transactions Tax (FTT) have released a statement re-affirming their commitment to the introduction of the tax through the enhanced cooperation procedure, a legal mechanism that allows a limited number of Member States to proceed with a Commission proposal without the unanimous support of Member States that such laws usually require.
The statement covers the following areas:
- The FTT would be introduced in a phased manner, with a tax on equities and “some derivatives” in the first phase
- Members States would be permitted to continue to tax other instruments which are not part of the initial phase of the FTT
- Further work is required to reach agreement on the form and scope of the FTT
- The implementation date for the FTT should be 1st January 2016 at the latest
This statement follows the rejection by the Court of Justice of the European Union of a UK challenge to the introduction of the FTT on the basis that the challenge was premature. Slovenia did not sign the joint statement although it has not officially withdrawn support for the FTT. A minimum of 9 Members States is required to implement the FTT through the enhanced cooperation procedure.
Many questions remain unanswered in relation to the proposed FTT. This includes the controversial “counterparty principle” under which an institution outside the FTT Member States would be liable to the FTT where it transacts with an institution in an FTT Member State. The extra territorial effect of the initial proposals, if implemented, would be a likely source of further legal challenge.