Brussels, 06/06/2016 (Agence Europe) - Optimism is in short supply a few days ahead of a ministerial meeting on the financial transactions tax (FTT), which initially aimed to reach agreement on the outlines of this future tax.
The Austrian finance minister, Hans Joerg Schelling, who is informally chairing the talks, seemed on Friday 3 June to be trying to temper expectations.
Reinforced cooperation on the FTT will survive as long as it has nine member states on board; as Estonia has withdrawn, there are now just ten participating states. “Probably next week, we're going to be down to seven, and that would mean we have to stop it”, said Schelling, adding that Belgium and Slovenia may potentially back out, but not disclosing which the third state would be.
A Belgian government source “categorically denied” any such plans, and Slovenia also appears unwilling to withdraw at this stage. The delegations did not appear to know on what basis the minister had reached this conclusion. At this stage, success, or indeed failure, will be collective.
For its part, Commission is waiting for the outcome of the technical discussions of this Friday 10 June. Internally, however, a source said that an alternative is being prepared, looking, amongst other things, at the Slovenian tax on financial activities (see EUROPE 11557). The Commission is reluctant to see the first ever reinforced cooperation in fiscal matters grind to a halt, as this would bode ill for the re-launch of the common consolidated corporate tax base (CCCTB).
If the FTT - an initiative which sends shivers up the spine of the London stock exchange - should fail, it would nonetheless be a boon to the camp in favour of keeping the UK in the EU, just before the referendum on the issue, one observer pointed out.
A public document of the Secretariat of the Council dated 3 June suggests the sheer scale of the work still to be done, given that the rates and allocation of the revenue are to be discussed at a subsequent stage.
This means that discussions on the proposed exemption for share transactions issued in non-participating states could be extended by decision of the participating states; “further work would be required, in order to determine which voting modalities permitted under TFEU could be used for taking such a decision”, as taxation decisions must be made unanimously and the interests of all member states must be preserved, according to the document. Several non-participating states have expressed reservations about this solution as regards shares issued on their soil, the document reads.
Regarding a reduced exemption for market-making activities, which could be based on the MIFID definition and taken in combination with the possibility, under certain conditions, for the states to apply a lower rate than the standard FTT rate on certain financial transactions carried out by market makers, one member state opposes this. Some non-participating states also felt that the definition was too restrictive.
An agreement has also still to be reached on the very principle of having temporary exemptions for certain derivative products. The mechanism to broaden the scope of the FTT in the future is also an issue. In an earlier document, Austria and Portugal suggested that the Commission propose amendments to widen the scope, which would be voted on by qualified majority.
According to one source, when the ministers seemed to be moving closer to an agreement in March, Belgium called for an exemption for futures and interest rate swaps, which constitute a significant chunk of the derivatives market.
Belgium, it was also reported, took issue with the fact that the directive applies to financial institutions, but also to “any other undertaking, institution, body or person” whose annual financial transactions represent 50% of its annual net turnover, a sort of clause aiming to prevent businesses which are not financial institutions, but which act like them, from coming under the scope of the directive. Belgium feels that the rate is arbitrary and is calling for an exemption for all non-financial players.
The work still to be done by the end of June is indeed considerable. It therefore seems that the member states have just two options left: admit defeat, or save face for the umpteenth time by going back to the drawing board. (Original version in French by Elodie Lamer)