EU Discussions on European Financial Transaction Tax
Taxation of the financial sector has long been one of the most controversial topics in European tax policy. Portugal, as the current presidency, is trying to reopen in the Council the debate on the proposal for a Financial Transaction Tax at the EU level.
The proposal to introduce a new European Financial Transaction Tax (FTT) has not had the unanimous support of EU Member States since 2011. Nevertheless, eleven Member States decided to move ahead with the initiative under the so-called enhanced cooperation procedure, including Slovakia.
The aim of the FTT is to ensure that the financial sector contributes fairly to public revenues and helps to prevent speculative transactions on the market. Even after the revised draft of Directive from 2019, based on the French model, a negative opinion persists. The amended proposal includes narrower scope of the tax base as well as an increase in the rate, new system for splitting the FTT revenues for participating Member States and an optional exemption for pension schemes. The concept of introducing FTT was not supported until 1 January 2021.
The Portuguese Presidency of the Council of the EU has asked the Member States to express on the key points of setting the tax. It is determined to make progress and discuss all possible ways of reaching a consensus. At the same time, it bases on the experience of France and Italy, which already apply a financial transaction tax at local level. In addition, in Portugal's view, a step-by-step approach will allow:
- Member States and the European Commission to evaluate the economic impact of the FTT;
- tax administrations to progressively develop efficient and effective collection procedures;
- financial institutions to gradually build up the knowledge and infrastructure required to facilitate tax compliance.
The various views of Member States on the introduction of a financial transaction tax do not indicate a significant shift in this area in the foreseeable future. The measure only makes sense in case of global implementation.
Currently, ten countries are supporters of enhanced cooperation: Belgium, France, Greece, Germany, Portugal, Austria, Slovakia, Slovenia, Spain and Italy.
It will be interesting to monitor the further development of European legislation, which for decades has pointed to fundamental differences of opinion on the issue of taxation of the financial sector.