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MEPs Call For Reforms To FTT Plans

by Ulrika Lomas,, Brussels

21 June 2013

The European Parliament's Economic and Monetary Affairs Committee has backed proposals for a wide-scope financial transaction tax (FTT), but has made recommendations for key rate and compliance changes.

European Tax Commissioner Algirdas Šemeta was forced earlier this month to deny claims that a "scale back" was on the cards. It was widely reported that the FTT rate for trading bonds and shares would drop from the planned 0.1 percent to just 0.01 percent, and that the timetable for implementation would be substantially altered. Šemeta said at the time that talks were "taking place in a constructive mood and there are various technical ideas on how to make it [the proposal] better."

However, this week's vote in the European Parliament further suggests that the FTT will not be implemented in its original form. A text adopted by the Economic and Monetary Affairs Committee retains the headline rates of 0.1 percent in stocks and bonds, and 0.01 percent on derivatives trades, but argues that participating countries should be free to apply a higher levy to "over the counter trades."

In addition, the Committee calls for trades in sovereign bonds to be taxed at only 0.05 percent, until January 1, 2017. During this period, trades of pension funds would face a tax of 0.05 percent for stocks and bonds, and 0.005 percent for derivatives. The Commission is urged to keep a close eye on the FTT rate for pension funds, especially when evaluating its performance.

The Committee also recommends the introduction of provisions designed to make evasion of the FTT more expensive than it would be to pay it. The reform would link payment to the acquisition of legal ownership rights, with the intention of ensuring that if the purchaser of a security failed to comply, they would no longer be legally certain of owning that security, thus making them unable to clear the trade centrally.

The European Parliament's role in taxation matters is nonetheless limited to consultation. The so-called EU11 of member states seeking to adopt an FTT – Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia, and Slovakia – must now reach a deal on its final shape.

TAGS: compliance | tax | investment | Belgium | Portugal | Slovenia | Estonia | Slovakia | Austria | France | Germany | Greece | Italy | Spain | trade

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