Brussels, 27/02/2015 (Agence Europe) - According to Reuters, Austrian finance minister Hans Joerg Schelling, speaking on Thursday 26 February after a meeting with the French finance minister, Michel Sapin, said that proposals for a financial transactions tax in 2016 should be ready to be unveiled at a Council meeting of EU ministers in Riga in April.
Four documents have been lodged for a technical meeting on Tuesday 24 February: two from the European Commission and two jointly prepared by Austria, Germany, Spain, France, Italy and Portugal. As requested in January, the Commission has studied the implications of the residence and issuance principles, one of the issues over which 'small' and 'large' member states are divided.
Under the issuance principle, which is favoured by the large countries, when a financial instrument is issued in a country within the FTT zone, the parties to the transaction are liable in the country where the instrument was issued, irrespective of the parties' country of residence. The Commission writes: “For products which are not issued, such as interest rate swaps or other OTC derivatives, the issuance principle is not applicable. This holds for a significant part of the market for derivatives. In this case it would also be impracticable to determine the “buy” or “sell” side of a contract leading to taxation at both sides of a transaction.” The Commission goes on: “Exchange traded derivatives, as well as exchange traded funds, tracking securities or other products such as indices, for example, could be taxed according to the issuance principle. However, it is easy to manipulate the place of issuance of a derivative or of such a fund and substitute products could be traded on exchanges outside the FTT jurisdiction.” The Commission says that the residence principle approach “would entail substantial reductions in administrative costs for both financial institutions/parties to taxable transactions established in the FTT jurisdiction as well as for tax administrations in their interactions with these financial institutions/parties.”
In another document, the Commission says that exempting financial transactions that are part of market-making “would drastically affect FTT revenues, while taxing such transactions would complement and support financial market regulation. From a tax policy point of view, exempting market-making services while at the same time taxing competing business models and actors providing similar services (i.e. acting as a principal and not acting as an agent) risks to distort competition, to violate the neutrality of the tax across actors and business model, and might increase the risks of tax avoidance.” The two documents from the member states mainly raise questions, one about the principles behind the collection of FTT and the other about application of the counterparty principle. No ministerial meetings are yet planned around the Ecofin Council on 10 March. (Elodie Lamer)