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EU FTT: End of the beginning, or beginning of the end?

Bob van der Made
The Informal ECOFIN Council meeting on September 13 2014 in Milan included a behind-closed-doors political discussion among the EU-28 finance ministers on the way forward with the EU financial transaction tax (FTT) under enhanced cooperation (no minutes or conclusions of these informal council meetings are published).

It is understood that although no substantial progress has been made or communicated after the informal ECOFIN, it seems that the participating EU-11 member states in the enhanced cooperation procedure (EU-11; Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain) are now closer to a compromise agreement than they have been. The project now seems to go in the direction of a UK-style stamp duty but with revenue sharing among the participating member states to keep the smaller EU-11 on board.

The provisional agenda of the (formal) ECOFIN Council of November 7 2014 includes a (public) political orientation debate on EU FTT among the EU-28 finance ministers. The EU FTT is a big political dossier for the Italian presidency so there seems to be momentum. The Italians will try their utmost to stick to the EU-10/11 commitment and timetable announced on May 6 2014, and to achieve meaningful progress during their presidency which runs until January 1 2015.

It is understood that the EU-11 finance ministers met separately on the eve of the Informal ECOFIN Council, and, not unimportantly, that the EU-28 ministers also already met informally in the margins of the Eurozone meeting the day before. However, at the technical level, there is still a considerable lack of agreement. There still seems to be strong disagreement around the purpose and technical design of the tax (for example, scope and inclusion of derivatives, issuance principle and/or residence principle, risk of relocation, collection mechanism and revenue sharing mechanism). These technical issues should be solved per the self-imposed EU-11 deadline by the end of this year. This seems an ambitious deadline, and the January 1 2016 starting date for step 1 of the EU FTT remains uncertain. However, the EU FTT project is one of the most politicised legislative projects to date and one to which four of the big five EU member states are committed, which are all part of the Eurozone grouping. The EU FTT is therefore unlikely to go away and initially will converge to the lowest common denominator. Recent developments may mark the end of the beginning rather than the beginning of the end for the EU FTT project.

Bob van der Made (bob.van.der.made@nl.pwc.com)
PwC
Tel: +31 88 792 3696
Website: www.pwc.com/eudtg

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