Brussels, 23/05/2014 (Agence Europe) - On Wednesday 28 May, the Greek Presidency of the Council of the EU will put forward three options to move forward in the first phase of the implementation of the financial transactions tax (FTT), which eleven countries of the EU may apply from January 2016 (see EUROPE 11073). Two documents, of which EUROPE has had sight, will be put to the member states - one on procedure, the other on the derivative products to be included in the scope of application of the tax.
On the procedure, the first option under consideration consists of determining solely the content and timetable of the first implementation phase. “This would mean that the Commission's proposal is amended so that its scope includes only the taxation of shares and the derivatives that will be identified”. In this way, the Presidency stresses, the member states which already tax financial products not included in the first implementation phase, or which plan to, would be able to do so. The directive would be implemented at the latest by 1 January 2016.
Under a second option, only the content and the timetable of the first phase will be decided upon, with a review clause for extension to other products. Same advantages as the first option. The review clause would establish that, on a certain date (or several dates, depending on the nature of the financial products), the Commission would submit an assessment report and, if necessary, a legislative proposal to bring in a broader common taxation system, to include, for example, transactions on bonds, structured products and derivatives.
The third option envisaged would be to determine the category of financial instruments of the original Commission proposal (other than the shares and derivatives identified) to be kept with either zero rates or later date of entry into force for these products. If the zero rate option is decided upon, the Commission would then have to change its proposal to specify how the zero rate would be increased.
The Presidency will sound the states out on these three options, whilst remaining open to other proposals from them. Irrespective of the path chosen, a review clause will be included to allow the Commission to draw up an ex post report on potential undesirable effects of the tax on the products concerned and a proposal on how to remedy the ease.
As regards the derivative products to be taxed initially, Greece has proposed two working methods.
One option is to analyse and select the derivative products on the basis of their underlying assets.
A second option is to proceed on the basis of the nature and characteristics of the derivatives. The Presidency explained that this solution would require two categories to be created. The first would include optional derivatives, in other words with an advance premium, and the second fixed derivatives (“forward” contracts or “futures”), with no premium payable in advance.
On Wednesday, the national delegations will be invited to react to the two methods suggested for the classification and identification of derivatives to be included in the first implementation phase of the FTT.
The Greek Presidency adds that the option to adjust the tax base depending on the category of derivative could be explored. For optional derivatives, the work could continue on defining the tax base depending on the characteristics of the instrument, for example, on the basis of the premium paid.
The Presidency will also ask the states whether they wish to continue work on the tax base. Amongst other things, do they agree to develop more options, taking account of the parameters of the tax base in conjunction with the tax rate? (SP)