Federal, State, Local and International Taxes -The finance ministers of
Germany and Austria have devised a new plan for the introduction of an European
Union (EU) financial transactions tax (FTT), according to a recent press
release from the Austrian Ministry of Finance. Despite recent deadlocks among
European countries over an FTT, the new plan calls for the imposition of an FTT
on equity transactions starting in 2016 and other financial transactions
(except government bonds) starting in 2017.
Background. The global
financial and economic crisis in 2008 resulted in widespread calls for the
introduction of an additional tax on the financial sector, as the financial
sector played a major role in causing the crisis. In this regard, several EU
Member States have already taken divergent action in the area of financial
sector taxation.
On Sept. 28, 2011, the
EC formally adopted a proposal for an FTT within the EU. It would be levied on
all transactions between financial institutions that involve financial
instruments where at least one party to the transaction is located in the EU.
However, it was unclear whether all EU Member States would support this
proposal.
Under the proposal,
unveiled by EC president Jose Manuel Barroso, the FTT would be imposed on the
exchange of shares and bonds at a rate not lower than 0.1 percent and on
derivative contracts, at a rate not lower than 0.01 percent. EU Member States
could elect to impose the FTT at higher rates.
An accompanying press
release indicated that the FTT could generate 57 billion euros per year, if
applied across all 28 EU countries. The proposal was originally slated to come
into effect on Jan. 1, 2014. It has since been postponed to Jan. 1, 2016.
Efforts to establish an
EU-wide FTT have floundered over the types of transactions to tax and the rate
of such a tax, according to Reuters. For instance, various countries attempted
to win exemptions for the type of securities that would hit their financial
institutions particularly hard. Great Britain, which has long opposed the FTT,
was fearful that such a tax would drive financial business away from London -
home of Europe's biggest financial sector.
Joint letter from
Austria and France. In addition to the recent press release from the Austrian
Ministry of Finance noted above, Reuters has reported that Austria's finance
minister, along with France's finance minister, have issued a joint letter to
their counterparts in other countries to seek a new approach to the FTT. The
letter from France's Michel Sapin and Austria's Hans-Joerg Schelling, claimed
to be seen by Reuters, stated as follows:
We suggest resuming the
work on a different footing to the approach that led to the negotiations
hitting a wall in 2014.
This fresh direction
would be based on the assumption that the tax should have the widest possible
base and low rates.
The French and Austrian
finance ministers would like the EU finance ministers who are meeting in
Brussels next week to consider this new approach, according to Reuters.
Reuters reported that
one EU official stated in December that the FTT was like the Loch Ness Monster.
“Everyone's talking about it, but no one's ever seen it.”
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