Brussels, 13/11/2015 (Agence Europe) - The range of alternatives for each component of the financial transactions tax (FTT) has been whittled down to two or three options, as shown by the documents prepared by the ministerial meeting of Monday 9 November.
For the FTT's application to derivatives, the most likely alternative is that the counterparties of managers of public debt, pensions operations (repos and reverse repos) and financial products with public debt as direct underlying would be exempt. The document points out, however, that Italy and Slovenia have doubts about this. There is little clarity about the Italian position, but Austrian finance minister Hans Joerg Schelling, who is piloting the talks at ministerial level, explained on Tuesday 10 November that Italy wanted public debt derivatives to be excluded from the scope of the tax. Italy's finance minister, Pier Carlo Padoan, is reported by Reuters as saying the same day: “The objection related to the extension of the scope (of the tax) to some derivatives” that may be linked to sovereign bonds.
For market-making in equities, a very small amount would be exempt, as applies to MIFID II. A second document says that a broad market-maker exemption for equities would collect less than 20% of potential revenue. For derivatives, there would not be any exemptions for market-making, as foreseen in the Commission's approach. France is reporting to be applying pressure to have a broad market-maker exemption.
For territoriality, the consensus for equities is reported to be cumulation of residence (the tax would be due if one of the parties to the transaction is registered in a member states involved in the enhanced cooperation) and issuance (the transaction would be taxed if it involves an instrument from one of the eleven countries involved in the FTT), with a review clause for extending this field. The document mentions Slovenian and Estonian reservations on this point. For derivatives, there would be cumulation of residence, issuance and counterparty principle (hierarchy of principles to be decided upon). A technical meeting will take place on 25 November, for which the Austrian Presidency will prepare a document setting out the issues still to be decided upon. The Austrian minister made it clear that if agreement is not reached by the ministerial meeting on 8 December, then it would be difficult to reach agreement. The tax rate will need to be decided once the FTT's structure has been worked out. The division of income will also need to be decided upon at that point. (Original version in French by Elodie Lamer)