In our last update, we outlined how the European Commission had authorised 11 Member States to introduce a Financial Transactions tax (FTT) through the enhanced cooperation mechanism. In April 2013, the UK (which like Ireland is not one of the 11 member states) launched legal proceedings challenging the validity of the measure. Like Ireland, the UK has consistently opposed the FTT, and in particular has concerns about the extraterritorial reach of the tax. The concern is based upon the “deemed establishment” rule contained in the proposal, which would subject a transaction to the FTT once shares, bonds or exchange-traded derivatives are issued from a person in one of the 11 participating Member States, regardless of where the transaction takes place. Commenting on the legal proceedings, an EU spokesperson has stated that the FTT proposal is legally sound and in adherence with EU treaties.
It also appears that the 11 participating Member States may be divided over what form the tax should take, with several of the participating countries expressing concerns about the FTT in an internal Commission document, which was leaked to the media. In the internal document, participating Member States asked the European Commission to clarify uncertainty over how the FTT is collected and explain how the Commission will ensure the successful implementation of the FTT by non-EU countries, and requested further evidence to support its assumptions on the expected impact of the FTT on financial markets.