Tag: Transaction tax

EU Financial Transaction Tax Proposed for 11 Member States

The following post comes to us from Iain Scoon, partner in the Tax Group at Shearman & Sterling LLP, and is based on a Shearman & Sterling client publication.

The European Union Financial Transaction Tax (EU FTT) is back on the agenda. While only 11 EU member states will now apply the EU FTT, the effect is likely to be felt more widely.

The Directive on the EU FTT that was originally proposed in September 2011 would have covered all 27 EU member states. Following opposition from several member states, a group of 11 – Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain (together, the FTT Zone) – have pressed on under the little-used “enhanced cooperation” procedure, whereby some EU member states can adopt a Directive that does not apply to the other member states.

The European Commission published a revised draft Directive on 14 February 2013 to implement the EU FTT in the FTT Zone. The draft Directive will require unanimous agreement between the FTT Zone states. If agreement is obtained, the EU FTT is proposed to come into force on 1 January 2014.


Italy Introduces a Financial Transaction Tax as of 2013

The following post comes to us from Vania Petrella, partner resident in the Rome office of Cleary Gottlieb Steen & Hamilton LLP. This post is based on a Cleary Gottlieb memorandum.

On December 21, 2012, the Italian Parliament approved the budget law for 2013 (the “Budget Law”) contemplating, among other things, the introduction of a new tax applicable to certain financial transactions (the “Financial Transaction Tax” or “FTT”).

While the Budget Law includes an articulate regime of the FTT, ”some of its features will be set with a Ministerial Decree to be issued by the Ministry of Economy and Finance (the “Ministerial Decree”) within 30 days from the entry in force of the Budget Law (which is subject to its publication in the Official Gazette, expected to occur in the coming days).


Draft French Financial Transaction Tax

The following post comes to us from Gauthier Blanluet, partner focusing on tax, mergers and acquisitions, and capital markets at Sullivan & Cromwell LLP, and is based on a Sullivan & Cromwell publication by Mr. Blanluet and Nicolas de Boynes.

Following the outline released by France’s and Germany’s Ministers of Finance on September 9, 2011, and the publication of a draft directive by the EU Commission on September 28, 2011, draft legislation to introduce a financial transaction tax (the “FTT”) in France was presented by the French government on February 8, 2012. This proposal will now be discussed by the French Parliament.

The scope of the FTT would not be as broad as that of the EU proposal. First, the FTT would be applicable on acquisitions of equity instruments only. Second, the FTT would be due if the equity instrument is issued by a French-listed company with a market capitalization of at least €1bn. The FTT would amount to 0.1% of the value of the equity instrument. The French government estimates that the revenues from the FTT would amount to €1.1bn per year.

Two other specific taxes would also be introduced by the same finance bill: a 0.01% tax would apply to high frequency trading operations located in France (the tax basis would be equal to the value of cancelled orders), and another 0.01% tax would apply to the notional amount of credit default swaps on EU sovereign bonds that are acquired by entities established or individuals domiciled in France.

In addition, the finance bill would repeal the recent reform of French transfer tax rules applicable to transfers of shares.


EU Proposed Financial Transaction Tax – Fortune or Folly?

The following post comes to us from Thomas A. Humphreys, head of the Federal Tax Practice Group as well as co-chair of the Tax Department at Morrison & Foerster LLP, and is based on a Morrison & Foerster bulletin by Mr. Humphreys, Peter J. Green, Jeremy C. Jennings-Mares, and Richard Jerman.

Since the financial crisis, there has been frequent talk of the introduction of a financial transaction tax. This tax, often referred to as “Tobin tax” after its original advocator, James Tobin, in the 1970s, would impose a levy on individual transactions undertaken by a financial institution. The subject has been discussed at G20 summits since Pittsburgh in 2009, [1] and the European Commission (the “Commission”) has made no secret of its desire to implement the taxation across its 27 Member States.

On Wednesday 28 September in the annual State of the Union address, José Manuel Barroso, President of the Commission, announced the long anticipated proposal for a European financial transaction tax. The tax, if implemented, would impact financial transactions between financial institutions from 2014, charging 0.1% against the exchange of shares and bonds and 0.01% across derivative contracts. The Commission believes the tax, with the potential to raise 57 billion euros per year, would “ensure that the financial sector makes a fair contribution at a time of financial consolidation” [2] noting, among other things, the significant government bailouts to support the financial sector during the crisis.