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EU11 Tobin Tax May Not Hit Derivatives

by Ulrika Lomas,, Brussels

20 January 2014

The so-called EU11 are debating whether certain categories of derivatives should escape their proposed financial transaction tax (FTT).

Reuters claims to have seen a document prepared for a two-day meeting of the group which note derivatives' "nexus with the government bonds market." Were the states to press ahead with an FTT on derivatives, their taxation may nevertheless be postponed.

According to the newswire, the documents are unclear on when a derivatives contract should be taxed. Options include when it has been "written, traded or comes to the end of its life."

Also considered for exclusion are corporate bonds. The aim would be to avoid "negative effects on the financing capability of companies, considering also the difficulties of receiving funding from the banking sector in the present environment."

The European Commission had intended for its FTT plans to be implemented this month. Under the original proposals, a 0.01 percent levy would have been imposed on derivatives. Last June, Tax Commissioner Algirdas Šemeta was forced to deny that a "scale back" was on the cards, after it was reported that only shares would be taxed at first, with bonds scheduled to come under the regime from 2015, and derivatives at an unspecified later date.

France, Germany, Belgium, Spain, Portugal, Italy, Austria, Estonia, Greece, Slovakia, and Slovenia are the eleven countries to sign up to use the Commission's "enhanced cooperation" procedure as a means of introducing the FTT. Enhanced cooperation allows those European Union member states that wish to work more closely together, to do so.

TAGS: tax | European Commission | Belgium | Portugal | Slovenia | banking | tobin tax | Estonia | Slovakia | tax rates | Austria | France | Germany | Greece | Italy | Spain | tax reform | trade | European Union (EU) | Europe

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