Over the past number of years, the Netherlands has been a consistent opponent of the introduction of a financial transactions tax (FTT) on a euro wide basis.  This was largely seen as a rational attempt to protect its powerful financial services industry.

In February 2012, the Dutch Central Bank issued a statement saying: “Introduction of a European financial transaction tax (FTT) is undesirable. It is doubtful whether it will counteract disruptive market behaviour.  Also, the current proposal will slow down economic growth.  [The Dutch Central Bank] estimates that the FTT would set Dutch banks, pension funds and insurers back EUR 4 billion per year.”

Governments change and the new Dutch government is seemingly better disposed to the FTT.  It announced that the Netherlands would support the FTT so long as the member states retain the proceeds of the FTT, Dutch pension funds are exempt and the FTT is not disproportionately burdensome on banks, as a Dutch tax is already applied to banks' balance sheets.  These, of course, are weighty and substantial caveats.

Arguing over the (future) spoils

The European Commission proposes that two thirds of the revenues of the FTT go to the EU budget, reducing by the same amounts the contributions of member states' to the EU budget, with the remaining one third being retained by member states.

The European Parliament, which has a consultative role in the FTT legislative process, is of the view that part of the revenues from the FTT would be managed at European Union level, with a corresponding drop in the contributions from member states.

The European Commissioner for Taxation and Customs Union, Algirdas Šemeta, is aware that divvying up the proceeds is a live issue.  Referring to the co-operating member states, he is quoted as saying: "Some of them would like to spend it individually. Some prefer to use part of the proceeds to finance the EU budget.  It is premature to say what will be the final outcome.

It can be seen from the new Dutch government’s endorsement of the FTT that there is certain to be a laser focus on the destination of any revenues from the FTT.

Yet others will argue as to the futility of discussing the destination of revenues, when a move by a minority of member states to adopt the FTT will bifurcate the single market for financial services, and cause transactions to flee from member states levying the FTT.

Next steps

The European Commission has agreed that the FTT is suitable for the enhanced co-operation procedure. This was a necessary step and the European Council of Ministers must now consider the issue.  The Council can proceed with the support of a qualified majority of member states and with Parliament's consent.  The European Commission has stated that the Council will consider enhanced co-operation later in 2012.

While the structure of the FTT will resemble the original draft directive introduced in September 2011, the Commission has said that certain changes may be necessitated by the smaller number of member states adopting the FTT.  Thus the exact text of the draft directive is not yet known.