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EU: Update on the EU FTT

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Bob van der Made

The German and French leaders publicly restated their commitment to lead the way on EU FTT on February 19 and also offered a self-imposed, concrete timeline for a compromise agreement among the EU11 participating member states by May. Notwithstanding that announcement, much remains to be done on the technical side and to reconcile the various interests of the EU11. The EU11 are meeting regularly and informally again in Brussels.

The next formal full EU28 Council working group meeting discussion on the FTT will be held on March 24 in Brussels and will be presided over by the Greeks. It will include a presentation by the European Central Bank (ECB) on technical EU FTT-related issues. However, it is unlikely that by then the EU11 will have reached a full-blown compromise and thus they may still be reticent in this EU28 setting.

It is understood that the Germans and French will likely be trying hard to find broad agreement first with the Italians and Spanish, and then with the other seven smaller member states participating in the enhanced cooperation procedure by May, around three main issues:

  • Which principle will apply: issuance or residence?

  • What is in scope?

  • Agree to step-by-step approach to implementation.

The French are apparently more involved again now, and both the French and the Germans are keen to demonstrate that the EU enhanced cooperation procedure (ECP) can be successful on such a politically difficult economic and financial EU policy measure, which in turn might lead to more use of ECP in other European monetary union related financial or economic initiatives.

It is now increasingly clear that a phased approach to introduction will be adopted, with a likely first step being an Italian stamp duty like the EU FTT model with a tax on equities and possibly equity derivatives.

If implementation is to happen in 2016, then this means that the participating member states will have to agree and start implementation in domestic law at the latest by the beginning of 2015. This is widely considered to be very ambitious, given where we are at this stage in the development of the EU FTT, however this highly political dossier remains hard to predict.

Bob van der Made (bob.van.der.made@nl.pwc.com)

PwC

Tel: +31 88 792 3696

Website: www.pwc.com

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