April Cut-off For EU Financial Transaction Tax Negotiations

by Ulrika Lomas, Tax-News.com, Brussels

23 March 2017

The EU member states taking part in the proposed EU financial transactions tax (FTT) will decide next month whether or not to proceed with the controversial tax, according to Austrian Finance Minister Hans Joerg Schelling.

Schelling appeared to suggest following the latest round of negotiations on the FTT that the talks would finally collapse at the next round, which is scheduled for May, if more countries decide to drop out.

"They must have made a decision by May," said Schelling, according to Euractive France. "If they do not approve it and decide to leave the group, the project is over."

Under the proposed FTT directive drafted by the Commission in 2011, the tax would be imposed on all transactions in financial instruments, with the exchange of shares and bonds taxed at a rate of 0.1 percent and derivative contracts at a rate of 0.01 percent.

However, the participating member states have found it very difficult to arrive at a consensus on the technical details of the new directive, particularly around the issues of how the tax will apply to derivative trades, and to transactions made by pensions funds.

A total of 11 member states originally committed to the FTT under the enhanced cooperation legislative mechanism, which requires support from a minimum of nine member states and can be used when unanimity cannot be reached on EU-level initiatives. These included Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia, and Slovakia.

The group was reduced to 10 member states in 2015 when Estonia decided to pull out of the talks.

Belgium, which is a significant European financial center, is also understood to have reservations about the direction the negotiations are taking, while Slovenia is concerned that the tax will cost the country more to administer than it will receive in tax revenue. Slovakia is the other country said to be on the brink of leaving the negotiations.

However, this isn't the first time Schelling, who is chairing the negotiations, has issued such a warning. Last June, he said that the FTT talks would dissolve if an agreement is not reached by September 2016.

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