COMMENT: Why Europe should persevere with the FTT

International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

COMMENT: Why Europe should persevere with the FTT

800px-cityoflondonatnight10small.jpg

With the Dutch Finance Minister calling on the European Commission to seek alternative means of taxing the financial sector, there are those in the media proclaiming the death of the financial transaction tax (FTT). They should not be listened to.

The UK’s opposition to the Commission’s proposals for a FTT has hardly been veiled. Chancellor George Osborne’s insistence that Britain would only consider implementing the tax if it were rolled out on a global basis is a transparent attempt to pass the buck for ever more. But it has to stop somewhere.

Through the Commission’s proposal, a rare opportunity has been granted to make this most controversial and once niche of all taxes work in the interests of the EU’s 27 member states and provide a blueprint for a FTT that could be successfully rolled out across the world’s financial centers.

Quite clearly, we are not going to see an EU-wide FTT without the backing of the UK and the inclusion of Europe’s largest financial centre. But a great many hopes have been pinned on a eurozone FTT giving that much needed model that could show the rest how it would work.

With the Netherlands’ call to look for alternative means of taxing the financial sector, citing concerns that the proposals on the table will not aid financial stability and will harm the Dutch pension sector, that dream appears, for the time being at least, stalled.

But EU-wide policy has always had to move at the pace of the slowest member. The keenest voices in France and Germany clamouring for a tax on financial transactions are not going to be quietened by UK little-island thinking or a lack of Dutch courage.

The Commission should be equally bold in its perseverance with the FTT. Look for other options, certainly, but do not shy away from riding an unprecedented wave of public opinion that the financial sector needs to make a fair contribution to its role in the crisis. It took ten years to get the common consolidated corporate tax base (CCCTB) to the stage of a proposal. These things simply take time and those proclaiming the death of the FTT after only a few short months of disagreements between member states, have probably reported prematurely.

In the meantime, governments desperately need money. The FTT has great potential to raise substantial sums with miniscule rates. It is little wonder, given the strength of public opinion and the weakness of public finances, why France is keen to run ahead of the pack.

Of course, in the short-term, the FTT may have a negative impact on the French economy as banks move transactions abroad, but if Sarkozy’s gamble pays off and Germany, Italy and other key European jurisdictions follow France’s lead, countries such as the UK and the Netherlands may find they’ve missed a trick and a substantial revenue raiser.

It may be that the French experiment fails. But dire situations need radical solutions and they are right to try. Europe should be right behind them.

Further reading:

EXCLUSIVE: EC’s Manfred Bergmann reveals why the FTT’s critics are wrong

Netherlands look for other means to tax financial sector

Should France go it alone with a Tobin tax?

Ten things you need to know about the EU financial transactions tax

Why EU FTT hitting cross-border transactions might not be so bad

more across site & shared bottom lb ros

More from across our site

ITR’s research shows that in-house tax counsel in Asia also feel underserved by their advisers’ international networks
World Tax global head of research Jon Moore tells ITR how his team spots standout submissions, and gives early statistical insights into this year’s entries
Australia’s conservative opposition will repeal controversial tax agent reporting rules if elected in the country’s May general election
Shapley would be the fourth person to hold the job this year; in other news, UK tax advisory firm MHA raised fewer funds than expected from its London IPO
The US needs to be involved in pillar one for there to be more international acceptance of the project, Michael Masciangelo says
The UK regulator is investigating EY’s auditing of the national postal service as it relates to the high-profile Horizon scandal, which saw hundreds wrongfully convicted
The directive will extend cooperation and information exchange around pillar two, according to the Council of the EU
Audit engagement partner Christopher Voogd has also been hit with a £32,500 charge over the firm’s work with Stirling Water Seafield Finance
China’s largest overhaul of its tax administration system in 24 years, featuring enhanced enforcement powers, is underway, says Abe Zhao of FenXun Partners
However, the US president increased tariffs on imported Chinese goods to 125%; in other news, UK tax firm MHA expects to raise £102m from its London listing
Gift this article