A European financial transaction tax (FTT) came a step closer today after the Council of the European Union agreed for member states wishing to implement the tax to press ahead.
A majority of Council members agreed for “enhanced cooperation” among the 11 member states that wish to pursue an FTT despite the UK abstaining from a vote alongside the Czech Republic, Malta and Luxembourg.
The proposed tax, which was initially mooted in 2011, will likely tax equity trades at 0.1% and derivatives at 0.01%, although exact details have yet to be drawn. It will only affect trading venues based in the country’s that support it, which currently include Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovenia, Spain and Slovakia.
Algirdas Šemeta, the commissioner responsible for Taxation and Customs Union, Audit and Anti-fraud, labelled the Council vote a “major milestone”, highlighting that the 11 countries behind the tax represented two thirds of EU GDP.
“The single market will be strengthened, as a patchwork of national approaches is replaced with one harmonised FTT. This can only make life easier for businesses, by reducing compliance costs and increasing legal certainty,” Šemeta said at a press conference following the decision, adding that he would present the proposal on the FTT in coming weeks, based largely on the 2011 outline.
Today’s vote, which comes after the European Parliament’s Economics and Monetary Affairs Committee passed a similar enhanced cooperation vote in November, gives consent for the legislative procedure to commence. This will begin with the Commission putting forward a revised proposal for an FTT, which will be the substance of the tax.
Plans to create an FTT were revived at an October meeting in Luxembourg of EU finance ministers. Under a clause in EU rules that let a group of at least nine states move forward without approval of all 27 member states, 11 countries decided to champion the tax.
The European Commission’s initial September 2011 proposal for an FTT claimed the public bore the cost of errors that led to the financial crisis, although some experts have warned any FTT would tax end investors, not financial institutions.
Furthermore, market participants may be able to avoid the tax using a range of instruments, such as single stock futures, which saw an increase in use after the French government implemented a similar tax in August.