EU-FTS: Eini­gung auf ein Besteuer­ungs­modell?

EU FTT

The FTT working group met on 12 September in advance of the full ECOFIN meeting on 14 September between EU economic and finance ministers. Public statements by politicians close to the FTT project have indicated that material progress has been made in securing agreement among members of the FTT zone. For example, Michel Sapin, the French finance minister, has been reported as saying:

“We’ve agreed on certain principles and we’ll be able to make more important decisions in October….That doesn’t mean we’ve decided all the details or that the financial transaction tax will start in October, but a certain threshold has been passed.”

Although the precise details of what has been agreed are not entirely clear at this stage, reports suggest that the FTT zone members are disposed towards:

• Applying the tax on the issuer (as opposed to residency) basis, such that securities issued within the adopting Member States would be in scope to FTT;
• Taxing transactions on a gross rather than net basis (similar to the tax base for the UK’s stamp duty reserve tax, but different from the net daily settlement basis of the French and Italian FTTs);
• Including all derivatives with the exception of those referencing sovereign debt. This would mean that the scope of application of the FTT to derivatives goes well beyond that of the Italian FTT and would cover interest rate and currency hedges, for example;
• Exempting government bonds and repos from the scope of FTT;
• A narrow market maker exemption. The European Commission estimates that a narrow market maker definition will only reduce the intended tax yield by about 20%; and
• FTT rates are yet to be agreed and will be determined once all other aspects of the FTT have been finalized.

We also understand that certain Member States have specific reservations with respect to the FTT. For example, we understand the Belgian delegation is keen to exclude certain life insurance products from the scope of FTT. However, such reservations are unlikely to be insurmountable.

Interestingly, Wolfgang Schäuble, the German finance minister, is also understood to have acknowledged that the proposed FTT may not necessarily sit comfortably with Capital Markets Union (CMU). CMU is a proposal by the European Commission intended to make it easier for EU businesses to access funding, including through capital markets. This is the first time a potential conflict between the FTT and CMU initiatives by the European Commission has been acknowledged by a senior official close to the FTT project. This conflict is clearly something that the FTT zone members would need to consider in more detail, but it is again unlikely to be an insurmountable obstacle.

The next FTT working group meeting is likely to take place at or around the next ECOFIN meeting which is scheduled for 6 October 2015 although an additional meeting may take place at the end of this month.

We will continue to keep you updated on all material developments.