Tuesday

26th Mar 2019

EU financial tax is legal, commission lawyers say

  • The EU's proposed financial transactions tax is not illegal, say commission lawyers (Photo: Joel Bombardier)

The EU's financial transactions tax is legal and would not discriminate against countries outside its remit, according to lawyers working for the European Commission.

A report by the commission's legal team, seen by EUobserver, rubbished claims by governments that the financial transactions tax could break international law.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

They insisted that the tax had no effect on the right of governments to set national tax policies, stating that "the provision has no impact on the freedom of non-participating member states to exercise their own tax competence in whatever manner they see fit."

Legal wrangling has dogged the progress on a tax which has become to symbolize the battle between politicians and financial institutions on whether banks should pay their share towards the costs of the financial crisis.

The tax, which is intended to dampen speculation in the bond and derivatives markets, aims at making banks pay about €35 billion a year.

The EU executive scrapped initial plans for an pan-EU transactions tax in 2011/2 after a number of governments indicated that they would veto it.

It submitted its latest proposal in February, using the so-called 'enhanced procedure' which allows a group of EU countries to agree extra rules between them. The tax would apply, on their request, to eleven EU countries - Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia.

Representatives of the EU-11 will meet in Brussels next week to discuss progress on the tax as the legislative clock counts down to next May's European elections.

EU officials are hopeful that new impetus for the transactions tax will come from Germany's new coalition government, which has made the tax a political priority, and called for its remit to be expanded to cover currency trading.

The paper, which serves as a direct rebuttal to a legal opinion released in September by lawyers representing EU governments which had described the proposal as "not compatible" with EU law.

The opinion added that the tax "infringes upon the taxing competences of non-participating member states" and is "discriminatory and likely to lead to distortion of competition."

In response, the Commission paper concluded that "what the Council perceives as discrimination is in reality nothing but a disparity between different national tax regimes."

The proposed tax currently under discussion would be levied at a 0.1 percent rate for bond transactions and 0.01 percent for derivative trades, potentially also catching high-frequency trading.

However, some countries outside the EU-11 have complained about the "counterparty" and "residence" principles in the bill, claiming that this could force them to collect the tax but not keep it.

The UK, which has the largest financial services market in Europe, and Luxembourg, have filed legal challenges to the tax at the EU's top court.

For her part, Natalie Alonso, spokesperson for charity Oxfam, which has campaigned for the tax, said that the commission opinion "puts to bed any legal concerns about the financial transaction tax."

EU commission not giving up on finance tax

The EU Commission has said it is not giving up on a planned financial transactions tax for 11 countries after a legal opinion said it was against Union law.

EU lawmakers pass contentious copyright law

The European Parliament backed a law on copyrighted content online. Defenders says it will safeguard right holders from being exploited by big tech firms. Critics say it spells the end of internet freedoms and curtails expression.

News in Brief

  1. EU tables plan for joint approach to 5G security
  2. MEPs agree to scrap summer time clock changes by 2021
  3. European Parliament votes on reform of copyright
  4. New French-German parliament meets for first time
  5. EU parliament reduces polling ahead of elections
  6. UK parliament votes to take control of Brexit process
  7. EU publishes no-deal Brexit contingency plans
  8. EU urges Israel and Gaza to re-establish calm

Magazine

The Spitzen process - a coup that was never accepted

It is a divisive 'Brussels bubble' debate: whether to give the European Parliament more of a say on who becomes the next European Commission president. But the issue goes right to the heart of European integration.

Magazine

All about the European Parliament elections 2019

EUobserver's new magazine is meant to help readers prepare for the European Parliament elections, no matter their level of knowledge. You can download and read the entire magazine now.

Stakeholders' Highlights

  1. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North
  2. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  3. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  4. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  5. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year
  6. Nordic Council of MinistersNordic commitment to driving global gender equality
  7. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan
  8. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  9. Nordic Council of MinistersNordic talks on parental leave at the UN
  10. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  11. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  12. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID

Latest News

  1. EU lawmakers pass contentious copyright law
  2. France takes Chinese billions despite EU concerns
  3. Europe before the elections - heading back to the past?
  4. Romania presidency shatters EU line on Jerusalem
  5. The Spitzen process - a coup that was never accepted
  6. Russia and money laundering in Europe
  7. Italy takes China's new Silk Road to the heart of Europe
  8. What EU leaders agreed on climate - and what they mean

Join EUobserver

Support quality EU news

Join us