Europe to delay €35bn Financial Transaction Tax by 6 months or more

The European Commission (EC) has indicated that there will be a delay of at least six months before the new harmonised Financial Transaction Tax (FTT) is ready for implementation in the first EU 11 countries. The tax on shares, bonds and derivatives was due to be introduced on 1 January 2014 under the Enhanced Co-Operation Arrangements of the EU.

This delay comes as discussions have stalled within the EC sponsored working group on the details of the new regime, and criticism mounts from investment & central bankers, pension & investment funds and foreign governments.

EC announces delay on its website

The EC published an update on its Europa website giving the background to the delay:

“Once agreed upon at European level, participating Member States will have to transpose the [FTT] Directive into national legislation. If agreement is found before the end of 2013, and there is a speedy transposition into national law by the participating Member States, this common framework for an FTT could still enter into force towards the middle of 2014.”

FTT has disappointed to far

A number of EU countries introduced their own versions of FTT in the past 10 months.  The tax revenues and drop off in trading have both been disappointing.  Hungary’s FTT, launched in 2012, has raised less than 50% of the forecast; France’s version, launched in August 2012 has raised about 50% of anticipated income; and Italy’s FTT, launched 1 March 2013, has led to a sharp drop off in Italian share trading.

Richard Asquith, Head of Tax at TMF Group, commented:

“This tax has been rushed in design and implementation, so a delay of at least six months would be no surprise.  The countries involved will have to listen more closely to the markets and other countries if they are to get this right.”

richard.asquith@tmf-group.com              Tel: +44 (0)79 777 23645

11 Countries to introduce harmonised FTT 1 Jan 2014

After failing to gain EU-wide support from all member states, 11 EU countries published plans on 14 February 2013 to introduce a harmonised FTT under the European Commission’s Enhanced Co-operation rules.  They include: France; Germany, Belgium, Spain, Portugal, Italy, Austria, Estonia, Greece, Slovakia and Slovenia.  The new tax will levy 0.1% on share and debt/bond transactions and 0.01% on derivatives.  It is payable by financial institutions (banks; pensions; fund managers; market makers; and hedge funds).  The tax has an extra-territorial element, which means instruments of companies located within the FTT countries which are traded in other countries (e.g. US, UK, Japan etc) are still liable to the tax.

 
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