EU Financial Transaction Tax

On 14 February 2013, the European Commission released its proposal for a Directive on the introduction of an FTT under the enhanced co-operation procedure (ECP). 11 Member States (Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain) are participating in the ECP. The February 2013 proposal was for a broad based tax on a wide range of transactions which would catch most equity, debt and derivative transactions in the FTT bloc. The February 2013 proposal was for minimum FTT rates of 0.1% on transactions in shares, bonds etc and 0.01% on derivative contracts. Since then, there has been furious lobbying by critics of the proposal regarding its potentially very serious impact on financial markets and the wider economy and negotiations amongst Member States participating in the ECP have been marred by delays, discord and indecision.

In May 2014, ten of the eleven participating Member States announced they would proceed with a first phase of an FTT on "shares and some derivatives" with a view to agreeing this by the end of 2014, and implementing this initial phase FTT by January 2016 at the latest.

However, this timetable proved hopelessly optimistic and EU Finance Ministers failed to meet their end of 2014 deadline and the EU Council Presidency issued a "progress report" essentially confirming the failure and the FTT remained becalmed for much of 2015.

However, December 2015 saw agreement in principle on some of the outstanding issues reached and, despite publication of a June 2016 report highlighting subsequent lack of progress, the threat of the FTT being introduced in part of the EU has re-emerged as a reality following an October 2016 meeting of Finance Ministers from participating Member States. The Finance Ministers reached an agreement on the "core principles" of the FTT, with its initial application to share transactions being limited to shares originating in the participating Member States for an unspecified transitional period. For further details, see FTT: agreement in principle reached?

Member States' unilateral FTTs

Whilst negotiations on an EU FTT have been slowly rumbling on over the past few years, some Member States have forged ahead with their own unilateral FTTs. France's FTT came into force on 01 August 2012 and on 01 September 2013, Italy introduced the second tranche of its FTT on high-frequency trading and equity derivatives. Portugal has also been progressing proposals for a unilateral FTT.

The unilateral FTTs introduced or being introduced by a number of participating Member States would need to be repealed by Member States if an EU FTT ever becomes effective, leading to more complications for market participants. It is rumoured that those Member States with unilateral FTTs already in place have been pushing for the proposed EU FTT to resemble their own national versions - although revenue from these has, to date, fallen short of expectations and so they may not offer a convincing blueprint.

The road ahead

Following the October 2016 agreement in principle on the core features, the EU Commission was tasked with producing revised text for the FTT. Release of the revised text by the EU Commission is still awaited.

With significant technical details still to be worked out and progress historically having proved so difficult, however, it remains highly uncertain as to whether, and if so when, the FTT may see the light of day.

More information

All our materials on the Commission's February 2013 ECP based proposal, its original 2011 FTT proposal and Member States' unilateral FTTs are on our Financial Transaction Taxes feature page.

The Commission's proposal for a Directive dated 14 February 2013 can be found here, along with its press release and FAQs. The EU Details of Commission's proposal for a Directive dated 28 September 2011 can be found in its press release and FAQs.

The EU Commission also has a webpage dedicated to the FTT which it updates with new developments.