Brussels, 08/07/2015 (Agence Europe) - On Wednesday 8 July, the Commissioner for Taxation, Pierre Moscovici, said that the financial transactions tax (FTT) could be in place in early 2017.
“I have the impression that all of the talks will wrap up during the autumn of 2015 with application at the start of 2017”, he told a conference taking place in Paris, quoted by Reuters. On the same day, the French finance minister, Michel Sapin, reiterated that an initial phase of application could be launched on 1 January 2016, a scenario towards which the participating states have been working for several months.
At a ministerial meeting held in Luxembourg in June (see EUROPE 11339), the Austrian Presidency of the group of 11 countries wishing to set in place the FTT are reported to have presented a draft compromise proposal on various components of the tax (the 'building blocks'), with the states seeking to agree on the details before putting these building blocks together.
In June, Moscovici and Sapin said that they hoped to see progress in July. According to three sources, however, it appears that they are now instead working towards the possibility of an agreement on the core of the tax in July or, if this does not prove possible, October. The talks will then continue on the outstanding technical issues, with a discussion on the rates to bring up the rear, according to two of these sources. This means that the actual text could emerge in 2016, under the Dutch Presidency of the Council of the EU.
Austria's draft compromise proposal, which one source took pains to point out is not an overview of the situation, will be discussed next week by the ministers, on the sidelines of the Ecofin Council. However, there is reported to have been very little progress at technical level since the last ministerial meeting. It is difficult, therefore, to say whether the text truly reflects the state reached by the talks.
In the Austrian text, the first point refers to the territory of the tax. For shares, the aim seems to be to bring together the principles of residence and issuance, applying them only to securities issued in the FTT zone. “With this option, the participant states which also choose to tax shares and other securities issued by businesses not established in the FTT zone will be able to do so, under their own national legislation”, writes Austria, which is chairing the ministerial discussions. Nor does the text make any reference to the counterparty principle, which featured in the Commission's initial proposal. Observers feel that these provisions look like concessions to France and Italy, as they are along the lines of the models adopted by these two countries.
On the scope of application for derivatives, only one state is reported to have taken position in favour of just taxing equity derivatives, at the most recent ministerial meeting, but this option has been shelved. Paris, whose financial centre is in the vanguard of this market, argued in favour of a broad scope and a low rate. Six states are in favour of taxing almost all derivatives (with the sole exception of derivatives with underlying sovereign bonds). Five states would like to see all derivatives taxed with the exception of a few, but for specific reasons (such as derivatives linked to interest rates or sovereign debt). The question of interest rate derivatives is more important than it may seem, according to the observers, as these represent 50% of the anticipated revenue from the FTT, according to the Commission's impact study. Of these five states, two are prepared to get behind the compromise.
The question of the nature of the taxable transactions (gross or net transactions, market-making activities, transaction chain) are still believed to be open. The participating states seem to be moving towards taxation of gross transactions and all transactions in a chain. (Elodie Lamer)