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German Banks Challenge French And Italian FTT

by Ulrika Lomas,, Brussels

17 December 2013

Leading associations from the German finance industry have urged the European Commission to ban the financial transactions tax (FTT) currently imposed by France and Italy on trading in French and Italian securities.

Dismissing allegations that their objections to the taxes are part of efforts to further stall and even block the planned European Union tax on financial transactions (EU 11 FTT), the groups insisted that they are merely seeking clarification on a legal issue.

According to Der Spiegel, six main banking associations in Germany have submitted an official complaint to the European Commission opposing the French and Italian FTT taxes, maintaining that the charges are in violation of European Union (EU) law. In two separate although similarly worded letters, the groups cited European Union law on free capital flows, prohibiting EU member states from levying indirect tax on securities trading.

Defending their objections, the financial institutions emphasized that it is currently unclear whether or not credit institutions are obliged to levy the French and Italian taxes, and whether or not they are then to be subject to sanctions for failure to comply.

Despite their assurances that the challenge is not part of a hidden agenda to block entry into force of an EU FTT, within the framework of enhanced cooperation, German banks have been vehemently opposed to the idea from the outset.

Back in April, President of the German Bundesbank Jens Weidmann warned of the negative implications of the planned EU FTT on monetary policy, maintaining that the short-term refinancing operations of banks will be affected. Weidmann stressed at the time that, in its current form, the EU 11 FTT is to be viewed "very critically."

The European Commission's EU FTT proposal provides for a 0.1 percent tax to be imposed on share and bond transactions, and for a 0.01 percent tax to be levied on derivative transactions. Divisions among the 11 participating jurisdictions are already delaying entry into force of the measure. Consequently, in view of the delays, France and Italy elected to press ahead with the introduction of their own levy. France's FTT has applied since August 2012, while Italy's levy entered into force in March of this year.

While confirming receipt of the German banking associations' letters, a spokesman for European Tax Commissioner Algirdas Šemeta has nevertheless made clear that no comment can be given at the present time, given that the matter is still being considered.

TAGS: tax | European Commission | law | banking | tobin tax | tax rates | France | Germany | Italy | European Union (EU) | Europe | Tax

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