The European Union (hereinafter “EU”) has spent years debating and detailing a plan to introduce a financial transaction tax (hereinafter “FTT”). In early 2013, the tax was set to debut 1 January 2014, however, delays and disagreements have held it back. Because of these delays, the target date for implementation has been moved to June 2014. The proposal for the FTT was meant for all member states but quickly many did not agree and only eleven member states representing two-thirds of the EU’s GDP agreed to move on towards implementation (Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia, and Spain).

 Purpose of Tax.  The proposed FTT is meant to discourage financial transactions in bulk, punish speculation and deterring excessive, commission-generating transactions. Despite being finalised, the application of the final FTT can be intuited from the proposed Directive that states that the FTT will apply to establish “financial institutions,” which are fully expanded upon, though the scope has not been defined to finality.

Legality of Tax. In late 2013, the legality of the proposed FTT was challenged by EU lawyers challenging compatibility with the EU Treaty; suggesting that the proposal “infringes upon the taxing competences of non-participating member states.” These challenges have certainly caused the setbacks resulting in delayed implementation. Though the eleven participating member states have chosen to keep moving forward with the proposal, they could face losing their efforts in a court proceeding.

If your financial institution is established in one of the participating member states please contact us now or after the FTT is established so we can help with the understanding of the proposed Directive, aid in structuring so that your business has the lowest impact from the tax and determine which systems require amendment in the face of the FTT.