On the website of the European Council and the Council of the European Union a Note from the General Secretariat of the Council to the Permanent Representatives Committee/Council was published. The Note contains a state of play of the discussions regarding the potential enhanced cooperation in the area of Financial Transaction Tax/the Proposal for a Council Directive implementing enhanced cooperation in the area of Financial Transaction Tax (FTT), which is expected to be discussed on the ECOFIN meeting of November 8, 2016.

The Note provides a high level summary of the discussions that have taken place regarding the Proposal for a Council Directive implementing enhanced cooperation in the area of Financial Transaction Tax as submitted by the European Commission on February 14, 2013.

Subsequently it provides a high level summary of recently discussed issues which include a.o.:

·   "Core engine" of FTT

·   Cost-Efficiency of FTT collection

The Note concludes by describing the way forward

Key conclusion seems to be that according to the document the participating Member States have come to a basic agreement on broad lines relating to a number of the building blocks of FTT (Core engine of FTT). These building blocks are set out in an Annex to the Note. The Note emphasizes however that this basic agreement will still have to be transformed into a legal text, where a number of issues will have to be refined further. Inter alia, an appropriate operational drafting solution will have to be found for designing the transitional periods for taxation of transactions in shares and derivatives.

The Note also states that the participating Member States have also presented their findings on possible solutions how to ensure adequate revenue at low administrative costs and some considerations on the actual costs of implementation of FTT. In this respect the Notes state a.o. the following:

“The findings of the participating Member States covered challenges and advantages of the centralised tax collection model (which could operate through centralisation of the existing market infrastructure or through creation of a new utility for tax collection) or self-assessment model. The participating Member States seemed to broadly agree that both the centralized tax collection model, as well as the self-assessment model, will play a role in administrating a future FTT. To cover all transactions taxed by a future FTT, a system of self-assessment by financial institutions will have anyhow to be put into place, either as an addition to a centralized system or as the main system of tax collection.”

Building blocks of FTT

As stated above an annex setting out the building blocks of FTT is attached to the Note. A.o. the following subjects are discussed in this annex.

·   Territoriality

o  Shares

o  Derivatives

·   Tax base for derivatives

·   Scope of derivatives

·   Market Making (for shares markets)

·   Taxable event for securities

·   Transaction chain

·   Real economy and pension funds

Click here to be forwarded to the Note as available on the website of the European Council and the Council of the European Union.

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