Brussels, 25/09/2015 (Agence Europe) - The states participating in enhanced cooperation on the financial transactions tax (FTT) are looking for ways to protect firstly the real economy and, secondly, pension and insurance funds from any unforeseen negative impacts of the tax. This emerges from two documents drafted ahead of a technical meeting of all 28 member states on the subject, to be held on Tuesday 29 September.
In the first document, of which EUROPE has had sight, Belgium, Germany, Spain and Portugal look into the question of the potential impact of the tax on the real economy. The document states that the Commission's proposal already contains a number of provisions aiming to protect the real economy (in particular, a low rate for derivatives). The document explains that businesses in the real economy (production and distribution of goods, provision of non-financial services) tend to make efforts to cover some or all of their business risks (related to exchange rates, the falling price of goods, and similar) and therefore enter into contracts for derivatives. Even low rates could prove significant in connection with the general costs of risk coverage, particularly if the tax affects financial products with a short maturity.
The countries are therefore wondering whether to build on the basis of the approach decided on by the European Parliament in a legislative resolution of July 2013, and seek to identify transactions directly related to the risk-coverage activities of businesses in the real economy. “This would give the opportunity to treat these specific transactions differently from others”, the document reads.
One idea could be to apply principles already laid down in a regulation, namely the EMIR regulation on over-the-counter derivatives. A number of specific options are available, such as exempting some or all of the transaction or reducing transaction rate aiming to reduce the commercial risks of companies in the real economy.
A second document, prepared by Belgium, Germany, Estonia, Spain, Portugal and Slovakia, explores various ways of mitigating the impact on pension and insurance funds. Ahead of a meeting of the 11 participating states, which was held in Luxembourg on 12 September, Belgium argued for such funds to be exempted from the FTT, as it is bound by its governmental agreement. The document recognises that only a limited proportion of pension fund transactions would be subject to the FTT under the final model decided upon. It is likely that the frequency of taxable transactions carried out by these funds will influence the burden of the FTT. Here again, there is the option of excluding some or all of the scope of application of the FTT.
The Eleven of the FTT hope to agree in October on the core engine of the FTT before continuing discussions on the rates and allocation of income of the FTT. (Original version in French by Elodie Lamer)