Agreement on FTT principles unlikely to result in action

Uncertainty and criticism continues to surround the proposed EU financial transaction tax

The future for the proposed Financial Transaction Tax (FTT) remains uncertain despite core principles being agreed last week. 

Investment Association director and head of tax, Jorge Morley-Smith, believes that progress for the proposed tax will remains slow due to domestic political and legal issues.

“There is no real political drive behind it and of course there are various legal problems around whether or not the enhanced co-operation procedure will work.

“Unfortunately, I believe that it will just linger in the background until a particular country puts it weight behind it.”

Under drafted plans, a minimum of 9 countries must be willing to introduce the tax for it to go ahead in accordance with the enhanced co-operation procedure.

Estonia became the latest European nation to withdraw from the enhanced co-operation group of countries last week and Morley-Smith also indicated that it would be difficult to predict whether the tax would go ahead at all due to the sheer amount of uncertainty involved and that alternative taxes may be proposed.

“Bringing in a tax which is broad in scope and raises lots of revenue can be very problematic for financial sectors and investors anyway regardless of political issues,” said Morley-Smith.

“A compromise may be a tax which is much narrower in scope and is probably similar to the UK’s own stamp duty.

“If there isn’t a harmonised FTT some European countries with a larger financial sector ay go ahead and implement their own un-harmonised tax but again due to uncertainty it is difficult to predict.”

FTT has yet to see any significant progress and has been heavily criticised by many in the EU.

The UK has already issued its objections to the tax with Chancellor George Osborne threatening court action if the tax goes against UK interests.

The wider financial industry has also criticised the tax for jeopardising retirement savings at a period when Europe is facing a pensions crisis.