Thursday

19th Apr 2018

Double taxation row as Brussels unveils transactions levy

  • It is still unclear where the revenue from the FTT will go (Photo: Ahmad Nawawi)

The European Commission was under fire Thursday (14 February) over claims that its planned tax on financial transactions (FTT) would lead to double taxation.

Unveiling the plans for an FTT backed by 11 EU countries, Taxation Commissioner Algirdas Semeta said that it was a "fair, technically sound and legally robust tax."

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

The proposal puts a 0.1 percent levy on bonds and shares and 0.01 percent on derivative products. Measures have also been put in place to prevent traders from circumventing the system by operating from outside the EU-11.

The use of an "issuance" principle as well as "residence" criteria means that traders operating outside the FTT-11 would also be liable to pay the tax.

"As long as you want to buy and sell European products you must pay the tax," said an EU official. This raises the thorny issue of double taxation.

The new rules will mean that if a UK trader buys or sells with a German institution, they will be hit with both the UK's domestic stamp duty and as well as the FTT.

Chas Roy-Chowdhury, head of taxation for the Association of Chartered Certified Accountants, accused the Commission of "deliberately seeking to taint transactions and products so that non-FTT states may be impacted by the tax."

"How it can be acceptable that some products and transactions will be subject to double or multiple taxation," he asked.

Under the new regime, traders and institutions to be exempted would also be required to prove that there was no financial link to a product in the FTT-zone. All reimbursements would be on an ex-post basis. Traders would also be expected to pay the levy at the point of transaction.

The levy will not apply to the European Central Bank, the ESM bail-out fund, or any other EU institutions, while day-to-day bank transactions and financial instruments relating to public debt or re-financing are also unaffected.

Meanwhile, countries outside the FTT-zone will still be required to collect the tax revenues - arising because traders on their territory did business with an FTT country - through EU legislation on administrative cooperation on tax matters.

Pressure for a tax on financial transactions based on the idea of Nobel prize winning economist, James Tobin, grew following the financial crisis amid public anger at multi-billion euro bailouts of financial institutions.

The commission says the FTT will reap between €30 to €35 billion per year for the 11 countries. What will happen with the revenue is less clear.

At last week's budget summit EU leaders agreed to consider whether to include the FTT as an "own resource" to the EU budget. But nothing has yet been agreed.

An EU official indicated that the disbursement of the cash would be decided by member states.

The commission expressed confidence that the tax will not lead to traders moving away from European financial markets, with a paper accompanying the draft directive insisting that the EU-11 market was "too big to be ignored".

The EU executive also estimates that the legislation could lead to a 15 per cent decline in the trade of shares and bonds and a 75 per cent reduction in the volume of derivative trading - widely regarded as the most susceptible to risky trading.

The legislation had already provoked criticism from the US Chamber of Commerce, who warned in an open letter released on Thursday to the Commission that the proposal amounted to "the unilateral imposition of a global financial transaction tax".

Commissioner Semeta played down any talk of a transatlantic rift, noting that he would be "more than happy to discuss" any concerns.

Meanwhile, Britain, with the most important financial centre in the EU, congratulated itself on being outside the FTT zone. A government spokesperson said the tax will "hit growth for the countries taking part."

An original proposal in 2011 for the FTT to include all 27 member states failed to gather enough support forcing willing countries to push ahead alone.

News in Brief

  1. MEPs urge better protection for journalists
  2. Dieselgate: MEPs back greater role for EU in car approvals
  3. European parliament adopts new organic farming rules
  4. EU granted protection to half million people in 2017
  5. Report: Facebook to carve 1.5bn users out of EU privacy law
  6. Greek court ruling permits migrants to travel to mainland
  7. Commonwealth summit hopes for trade boost after Brexit
  8. Merkel and Macron meet to finetune eurozone reform plans

Stakeholders' Highlights

  1. ILGA EuropeParabéNs! Portugal Votes to Respect the Rights of Trans and Intersex People
  2. Mission of China to the EUJobs, Energy, Steel: Government Work Report Sets China's Targets
  3. Martens CentreJoin Us at NET@WORK2018 Featuring Debates on Migration, Foreign Policy, Populism & Disinformation
  4. European Jewish CongressKantor Center Annual Report on Antisemitism Worldwide - The Year the Mask Came Off
  5. UNICEFCalls for the Protection of Children in the Gaza Strip
  6. Mission of China to the EUForeign Minister Wang Yi Highlights Importance of China-EU Relations
  7. Nordic Council of MinistersImmigration and Integration in the Nordic Region - Getting the Facts Straight
  8. Macedonian Human Rights MovementMacedonians in Bulgaria Demand to End the Anti-Macedonian Name Negotiations
  9. Counter BalanceThe EIB Needs to Lead by Example on Tax Justice
  10. ILGA EuropeTrans People in Sweden to be Paid Compensation for Forced Sterilisation
  11. International Partnership for Human RightsThe Danger of Standing Up for Justice and Rights in Central Asia
  12. Mission of China to the EUChina and EU Must Work Together to Promote Global Steel Sector

Latest News

  1. Obscurity surrounds EU military fund's expert groups
  2. New EU party finance rules short circuit accountability
  3. Draghi to stay in secretive 'lobby' group
  4. Bulgaria offers lesson in tackling radical-right populists
  5. Getting secret EU trilogue documents: a case study
  6. Selmayr case scars Parliament and Commission
  7. Beyond macho: Turkish-EU ties
  8. 'Flobert' guns - Europe's latest terror loophole

Stakeholders' Highlights

  1. Swedish EnterprisesEU Tax Proposal on Digital Services Causes Concern for Small Exporting Economies
  2. Europea Jewish CongressCondemns the Horrific Murder of Holocaust Survivor Mireille Knoll in Paris
  3. Mission of China to the EUAn Open China Will Foster a World-Class Business Environment
  4. ECR GroupAn Opportunity to Help Shape a Better Future for Europe
  5. Counter BalanceControversial Turkish Azerbaijani Gas Pipeline Gets Major EU Loan
  6. World VisionSyria’s Children ‘At Risk of Never Fully Recovering', New Study Finds
  7. Macedonian Human Rights MovementMeets with US Congress Member to Denounce Anti-Macedonian Name Negotiations
  8. Martens CentreEuropean Defence Union: Time to Aim High?
  9. UNESDAWatch UNESDA’s President Toast Its 60th Anniversary Year
  10. AJC Transatlantic InstituteAJC Condemns MEP Ana Gomes’s Anti-Semitic Remark, Calls for Disciplinary Action
  11. EPSUEU Commissioners Deny 9.8 Million Workers Legal Minimum Standards on Information Rights
  12. ACCAAppropriate Risk Management is Crucial for Effective Strategic Leadership