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Commission Gives Green Light To EU FTT

by Ulrika Lomas,, Brussels

25 October 2012

The European Commission has recently given its green light for enhanced cooperation on plans for a European Union (EU) financial transactions tax (FTT), by adopting a corresponding proposal for a Council Decision.

In a statement, the Commission says that the ten member states that wish to apply an EU financial transaction tax through enhanced cooperation should be allowed to do so, emphasizing that all of the legal conditions for such a move have been met.

According to the Commission, enhanced cooperation on the FTT would not only bring "immediate, tangible advantages" for those countries that participate, but would also contribute to a better functioning Single Market for the Union as a whole.

President Barroso said: "I am delighted to see that ten member states have indicated their willingness to participate in a common FTT along the lines of the Commission's original proposal. This tax can raise billions of euros of much-needed revenue for member states in these difficult times. This is about fairness: we need to ensure the costs of the crisis are shared by the financial sector instead of shouldered by ordinary citizens."

Algirdas Šemeta, Commissioner for Taxation, commented: "There are EU wide benefits to a common FTT, even if it is not applied EU wide. It will create a stronger, more cohesive Single Market and contribute to a more stable financial sector.”

Šemeta continued: “Meanwhile, those member states that have signed up for this tax will have the added bonus of new revenues and fairer tax systems that respond to citizens' demands.”

He added: “I promised an extremely quick response once it was the Commission's turn to act, and that is what we have delivered today. I'd now urge the parliament and the Council to keep up the pace and quickly give the green light for the willing member states to move ahead with an EU FTT."

Over the course of the past few weeks, ten member states have sent official requests to the Commission for enhanced cooperation on an FTT, all citing the Commission's proposal for an FTT as the basis upon which they wished to proceed.

Once the minimum required number of member states had signed up, the Commission immediately set about analyzing these requests to ensure they met the conditions for enhanced cooperation laid down in the Treaties, ensuring, for example, that enhanced cooperation in this area would further the objectives and interests of the EU, would not undermine the Single Market, and would respect the rights, competences and obligations of non-participating member states, while allowing any member state to join at a later stage.

According to the Commission, the agreed proposal for a Council Decision is an important procedural step in the enhanced cooperation process, noting that it must be adopted by a qualified majority of member states, and receive the parliament's consent, in order for the ten member states to move forward.

Later in the year, the Commission intends to table the substantive proposal on the harmonized FTT, for discussion and adoption by the participating member states. That proposal will be very much along the lines of the original FTT proposal tabled by the Commission in September 2011, as requested by the member states in their letters. However, the Commission will carefully examine whether some adjustments are required to reflect the smaller number of member states that would be applying it.

In September 2011, the Commission tabled a proposal for a common system of financial transactions tax, with the objective of improving the functioning of the internal market in this area. In addition, it was estimated that the harmonized tax would deliver EUR57bn (USD74bn) in revenues each year.

Following intense discussions on this file, there was consensus at the ECOFIN meetings in June and July 2012 that unanimity would not be reached within a reasonable period. At that time already, a strong, core group of member states expressed an interest in proceeding with a common system of FTT through enhanced cooperation.

On September 28, 2012, France and Germany sent a letter to Commissioner Šemeta, officially requesting enhanced cooperation to be authorized, on the basis of the Commission's proposal. This was followed by similar letters from Austria, Belgium, Greece, Italy, Portugal, Slovakia, Slovenia and Spain.

A minimum of nine member states are needed for enhanced cooperation to be allowed under the Treaties.

TAGS: tax | investment | European Commission | Belgium | Portugal | Slovenia | law | banking | capital markets | forex | tobin tax | Slovakia | Austria | France | Germany | Greece | Italy | Spain | European Union (EU) | Europe

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