Discussions on a Financial Transaction Tax (FTT) are progressing step by step. A first compromise text inspired by the French model (see EUROPE 12151/2) has been presented.
“At the ministerial meeting of 11 March 2019, the introduction of an FTT Directive based on the French TTF model received wide support. This draft proposal for a directive reflects this option”, according to the document, of which EUROPE has a copy.
On Wednesday 22 May, at the meeting of Member States' ambassadors to the EU (Coreper), Germany, supported by the members of the enhanced cooperation, reportedly asked for an exchange of views on the FTT to be put on the agenda of the June ‘Ecofin’ Council, said a European source who was rather optimistic that this request would be accepted.
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 duo wants to have a discussion with the Twenty-Eight in order to invite the other countries to join the enhanced cooperation (see EUROPE 12250/12) given the new compromise.
The FTT would be due on acquisitions of shares of listed companies whose registered seat is located in a Member State and whose market capitalisation exceeds €1 billion.
The text confirms that the tax rate would be fixed by each participating Member State, but should not be less than 0.2% or more than 0.3%. The text also specifies that Member States should apply the same rate to all financial transactions.
The FTT would be payable to the tax authorities of the participating Member State in whose territory the company or entity that issued the financial instrument has established its registered seat. However, the document states that discussions on this point are still needed.
Collecting the tax in the country where the issuing entity is registered would thus make it more difficult to avoid, since transactions in the issuing entity's equity securities would be taxed in the Member State of registration, regardless of where the transaction takes place and the nationality or residence of any financial intermediary. Therefore, the only way to avoid the tax would be for the issuing entity to move its seat to a country that does not participate in the FTT.
According to the text, participating Member States should have transposed the provisions of the Directive into their national legislation by 1 January 2021 at the latest. The provisions would take effect on 1 June 2021.
The text also includes a revision clause which provides that every five years, and for the first time by 31 December 2023 at the latest, the Commission shall submit a report to the EU Council on the application of the Directive. The report should at least examine the impact of the FTT on the proper functioning of the internal market, the financial markets and the real economy.
It should be noted that all dates in the text are currently in square brackets and are therefore subject to change.
In any case, an agreement on the FTT is not imminent, according to our sources. Significant disagreements persist, particularly over the distribution of FTT revenues.
Moreover, the text does not address the question of revenue sharing between participating Member States proposed by the Franco-German duo, nor does it mention the possible use of the revenue for the future budget of the euro area or for the European budget. (Original version in French by Marion Fontana)