EU’s Financial Transactions Tax Moves Ahead

Ten countries agree to some aspects of the tax; Estonia holds out.
Matthew HellerDecember 8, 2015

Ten European Union countries have reached a tentative agreement on some aspects of a much-delayed tax on financial transactions but left some issues, including the rate of the tax, unresolved.

The European Commission first proposed a financial transactions tax (FTT) in 2011 to recover some of the public money used to support banks, curb speculative trading, and unify the various levies already charged in several EU countries. Finance ministers representing 11 countries had aimed to strike a deal by the end of this year.

The tentative agreement announced Tuesday includes a tax on all share transactions, including intraday trading, and on derivative trades. A final deal is expected in June.

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“FTT is alive again, we have a technical compromise on what for, where and what is taxed,” said Austria’s finance minister, Hans Jörg Schelling.

“We have a breakthrough, but we are not at the end yet,” he added.

But Estonia, one of the 11 countries originally involved in the discussions, wouldn’t sign the agreement and, according to the Wall Street Journal, the deal “doesn’t address several major aspects of the tax, underlining the political differences countries face on the remaining issues.”

“Deciding what instruments to tax — and who should get the money — has proved difficult,” the WSJ said. “Some countries have also voiced concerns about reducing the scope of the tax to such an extent that the cost of collecting it would exceed the proceeds it would raise.”

According to Reuters, the finance ministers agreed that the share transaction tax would be paid by traders in one of the 10 countries on shares issued in those countries. Derivatives transactions would be taxed “on the principle of the widest possible base and low rates and [the tax] should not impact the cost of sovereign borrowing.”

The WSJ said, “Finance ministers from some of the countries with no plans to impose an FTT, such as Sweden and the U.K., have said the tax could have a negative effect on economic growth and capital markets, while the financial services industry has long criticized the plan, arguing it could harm business in London and elsewhere.”

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