EU decides to implement Financial Transaction Tax
By TIOL News ServicePARIS, JAN 25, 2013: THE European Commission has resolved to use the "enhanced cooperation procedure" to implement the much talked about financial transaction tax (FTT) across France, Germany, and the nine other EU Member States that wish to do so thereby making it easier for the European Commission to tax within the EU and also extra-territorially, in other countries including the UK, US and Asia. Most equity, debt and derivative transactions in these jurisdictions will be subject to the tax from as early as 2014. The present form of the FTT embodies a trivial shift from the original plan that was to implement the tax across the whole of the European Commission. However, the Czech Republic, Luxembourg, Malta and the United Kingdom abstained. As such there is now an "FTT Zone" group of countries which will levy the tax inside the zone and abroad. The Commission is expected to release a formal proposal in the weeks to come. An FTT Zone financial institution's branches worldwide will be subject to the FTT on all of their transactions. The expected design of the FTT also means that non-FTT Zone financial institutions will be taxed whenever they transact with parties in the FTT Zone, and whenever they deal in securities issued by an entity established in the FTT Zone. Apart from this,, clearing systems like Euroclear, may magnify the scope of the zone, "as transactions cleared through clearing systems in the FTT Zone may be subject to the FTT even where the parties and underlying issuer are all established outside the FTT Zone. There may be scope for a legal challenge however; as the brief notes that if the FTT is enacted as it stands now it may not be compliant with EU laws. They say specifically that, "there are very limited precedents for the use of the enhanced cooperation procedure, and no precedent for the EU imposing any taxes other than VAT." The Commission plans to fully enact the tax by the start of 2014, with the formal draft proposal due out in February of this year.
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