Out-Law News 2 min. read
26 Apr 2012, 4:05 pm
In a resolution on the Commission's draft FTT Directive, the European Parliament's Economic and Monetary Affairs Committee (ECON) also said that the tax should still go ahead even if only some of the EU's 27 member states initially choose to opt into it.
"The committee has been consistent with what Parliament has been pushing for and I now expect member states to show the same consistency with their declarations," said the proposals' rapporteur Anni Podimata. "It is time to change the financial services business model, away from high frequency trading to serving the real economy.
The adopted text adds an 'issuance principle' to the Commission's proposal, meaning that financial institutions located outside the area which ultimately adopts the tax would also be obliged to pay it if they traded securities originally issued by one of the participating states. Securities issued outside the zone but traded by at least one institution established within it would also be caught.
Pensions law expert Simon Tyler of Pinsent Masons, the law firm behind Out-Law.com, said that it was a "huge relief" that the FTT, dubbed a 'Robin Hood tax' by campaigners would not apply to pensions.
"Pensions savers have already been hard hit by poor investment returns and dire annuity rates," he said. "Another tax on top would have discouraged pension saving further at a time when the Government is desperate to encourage more people to save for a pension. Recent figures from the Office for National Statistics show that only 48% of employees are now in a pension scheme, compared with 55% in 1997."
According to proposals (31-page / 110 KB PDF) published by the Commission in September, the new FTT would be charged where financial instruments such as shares, bones, securities and derivatives are traded between banks where at least one party is located in the EU. The tax is designed to ensure that the financial sector makes a "fair contribution" towards the costs of any future government bail-outs.
Earlier this month, banking body the European Banking Federation (EBF) criticised the plans, warning that the FTT may not be an "appropriate and proportionate" way of reducing risk in the financial markets. The proposals have also met with resistance from individual member states including the UK, with the House of Lords being the most recent to denounce the proposals as "flawed". In a critical report, the Lords' EU select committee warned that introducing the tax would force banks to relocate from the 0UK's financial centre in the City of London.
The resolution adopted by ECON states that if it is not possible to establish the tax across the EU at its outset, "enhanced cooperation" should be envisaged through adopting it in as many states as possible. However, it recognises that any tax that only applies in a very limited number of states could "lead to a significant distortion of competition" and that measures should be taken to address this.
