03 July 2013

Plenary Session: Financial Transaction Tax - Wide scope and attention to pension funds and SMEs

Lower rates should apply until 1 January 2017 for trades in sovereign bonds and pension fund industry trades. Finally, a new legal ownership principle was inserted to make tax avoidance more costly.

Anni Podimata (S&D, EL), Parliament's lead MEP on the matter, welcomed Parliament' s tenacity. "Parliament has stayed true. We have taken a consistent line. We strongly believe that such a tax is the way the sector can contribute to emerging from the crisis and returns to its proper job of serving the real economy", she said. The resolution was passed by 522 votes to 141, with 42 abstentions.

A wide scope

The adopted opinion backs the Commission proposal that the financial transaction tax (FTT) should cover a wide range of financial instruments, be it stocks, bonds or derivatives. At the same time, it addresses specific concerns to ensure that the less speculative trading activities of pension funds or those involving SME shares are less affected by the tax.

Tax rates

The text retains the tax rates proposed by the Commission, i.e. 0.1 per cent for trades in stocks and bonds and 0.01 per cent on derivatives trades. However it also says participating countries should be allowed to apply a higher rate to riskier "over the counter" trades (which are less tightly controlled and transparent than stock exchange traded instruments).

However, trades in sovereign bonds should be only taxed at 0.05 per cent until 1 January 2017 and, up until the same day, trades of pension funds would be taxed at 0.05 per cent for stocks and bonds and 0.005 per cent for derivatives. It adds that when evaluating the FTT's performance, the European Commission should pay special attention to the rate of taxation applied to pension funds.

FTT: expensive to avoid

The adopted text introduces provisions to make evading the FTT potentially far more expensive than paying it. The text links payment of the FTT to the acquisition of legal ownership rights. This means that if the buyer of a security did not pay the FTT, there would be no legal certainty of owning that security and the trade could not be cleared centrally.

Next steps

The European Parliament has a consultative role on tax matters. It is now up to the 11 Member States participating in the enhanced cooperation arrangement to reach a deal. The 11 participating Member States are: Austria, Belgium, Estonia, France, Germany, Italy, Greece, Portugal, Slovakia, Slovenia and Spain.

Press release

Following the European Parliament's vote in favour of the Financial Transactions Tax proposal today, Commissioner Šemeta said: "Today we've had a clear signal that popular and political support for the financial transaction tax is still strong. I warmly welcome the Parliament's vote in favour of the FTT under enhanced cooperation, which 11 Member States have requested. The goals of fair taxation, a cohesive Single Market and a more responsible banking sector are more relevant than ever – and we know that the FTT can contribute to all three.

"With today's democratic backing, Member States must now press ahead in reaching quick agreement on this file. Rumours and speculation are not good for business, and create a difficult environment for our economic operators. So it is time for the 11 Member States to converge on the FTT to be implemented, while also protecting the spirit and purpose of this tax. The European Parliament has presented some good ideas today to feed into discussions. And, for its part, the Commission will continue to support negotiations in every way possible, to facilitate a swift and ambitious compromise on the FTT."

Full statement

© European Parliament