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The European Union (EU) has authorised 11 member states to proceed with the introduction of a financial transaction tax (FTT) through enhanced cooperation, sparking criticism from tax and business experts.
The countries are Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia. The UK was among those that abstained in the vote to accept or reject the measure.
The proposed levy will be raised against transactions between financial institutions, with 0.1% on the exchange of shares and bonds and 0.01% across derivative contracts. A proposal of the details will be put forward by the European Commission on 14 February.
It is only the third time in which enhanced cooperation has been launched to allow a limited number of EU members to proceed with a measure, and the first time in the area of taxation.
The CBI’s director of competitive markets, Matthew Fell, said he hoped the participants would reconsider the tax, and added that it was “disappointing that eurozone economies are pursuing the FTT, the costs of which ultimately fall on consumers and businesses, and will be a drag on the eurozone recovery.
“This tax must not impinge on non-participating member states by including extra-territorial reach into financial services activity conducted in the UK,” said Fell.
Frédéric Donnedieu de Vabres, chairman of leading tax advice network Taxand, criticised the “striking lack of guidance on both the rate and scope of the new levy” and said “multinational companies, specifically those in the financial services arena, will view these developments with concern, not only due to the lack of clarity on implementation, but also because of the potential for a distinctly unlevel playing field for trading across the continent”.
He continued, “The implementation of the tax will also result in a trading dichotomy across Europe. As things stand, financial hubs such as Frankfurt, Paris and Madrid will be affected, with other centres of trading, including London, seemingly gaining a significant advantage through their resilience in not signing up to the agreement.
“What is clear is that implementation, in whatever form it finally takes, could have serious consequences for the overall competitiveness of Europe as a global hub for financial services.
“The lack of consistency in the taxation of trading could lead multinationals to avoid the continent altogether, instead looking to the US or Asia,” said Donnedieu de Vabres.
