In December 2015, 10 European Union members agreed on key aspects of a harmonized financial transaction tax (FTT).
Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain agreed that an FTT should apply to all share transactions, including intraday trades. An exception was made for the transactions of agents and clearing members, when acting as facilitators. Although the UK has dispensed with the idea of an FTT, other EU countries see it as a way of stimulating growth and of curbing speculative trading.
The 10 EU countries stated that the FTT’s jurisdictional scope should be based on the location of parties to the transaction and the location of the share issuer. When it comes to derivatives, the countries agreed that the tax should follow the principle of a wide base and low rate. Furthermore, the FTT shouldn’t affect the cost of sovereign borrowing or have any negative impact on the real economy and pension schemes.
Valdis Dombrovskis, vice president of the European Commission, stated that the EC would “do everything necessary to ensure that the FTT respects European and international law” and that it was consistent with other commission initiatives.
In contrast to the FTT’s progress, the European Commission may delay the implementation of MiFID II (the markets in financial instruments directive) till January 2018 to give the financial services industry more time to prepare. MiFID II aims to make financial markets and trading across different asset classes more transparent and resilient by requiring higher levels of transaction reporting and moving over-the-counter transactions onto regulated platforms.
