France and Germany are continuing their work to relaunch the Financial Transaction Tax (FTT) based on the French model (see EUROPE 12151/2). In a working paper, dated 6 May, of which EUROPE has had a copy, the two Member States set out their common position and indicate that they wish to deliver “a proposal that is capable of producing a broad consensus”.
Since 2013, discussions have been taking place between ten Member States participating in enhanced cooperation, namely France, Germany, Belgium, Portugal, Austria, Slovenia, Greece, Spain, Italy and Slovakia.
But the Franco-German couple would now like these discussions to be expanded to so that "as many Member States as possible are again included”. The document was prepared for the discussion scheduled for Tuesday, May 7, at the meeting of the High Level Working Party on Tax Questions in the EU Council, but which did not take place in the end.
France and Germany want to have a discussion at Twenty-eight in order to invite other countries to join the enhanced cooperation, possibly at the June Ecofin Council, according to a European source.
There is said to already be a consensus within the enhanced cooperation to move forward on the French FTT model. The proposed FTT would be levied on acquisitions of shares of listed companies whose head offices are located in the member states and whose market capitalisation exceeds €1 billion on 1 December of the year prior to the year when the tax is assessed. The tax rate would not be lower than 0.2% of a security’s purchase price at the time of acquisition.
The paper proposes that the “taxable event” be defined as”an acquisition that results in the transfer of ownership of an equity security”. As a result, only the net position of an acquisition at the end of the day would be subject to the tax and the tax would be imposed, regardless of the location where the transaction is conducted.
The FTT would also cover transactions involving European securities conducted on non-European exchanges, but would exempt certain specific transactions such as market-making activities and intraday operations.
Countries that have already introduced a national tax with a broader tax base would have the possibility to maintain it insofar as the directive provides for a minimum level of harmonisation, the document states.
Member States have yet to agree on the mechanism for distributing FTT revenues. France would prefer to allocate revenues to the future budget of the euro area, while Germany would prefer the budget of the Twenty-seven after 2020.
In any case, both countries recommend a certain degree of mutualisation. "Instead of a rule requiring each participating Member State to transfer its individual share of FTT revenue to the EU and to subtract this share from its contribution, FTT revenue could be mutualised among participating Member States by replacing a share of the individual contributions of participating Member States through a combination that is to be designed” the document explains. Such an initiative would help to attract other countries to the enhanced cooperation.
Both countries also believe that the European Commission's overall performance assessment of the European Commission's FTT, at €3.6 billion, may be underestimated. They ask the institution to review its forecasts “in light of actual data gathered by those member states which have already implemented such a FTT”. (Original version in French by Marion Fontana)