The financial transactions tax (FTT) is set to be finalised in scope by the end of this year ahead of a January 2016 start date. The Commission wants to impose a 0.1% tax on share and bond trades and a 0.01% charge on derivatives transactions. The major stumbling blocks on the levy to date include which derivatives to capture and the extraterritorial scope of the tax. The European Council's working group responsible for the tax is meeting to discuss outstanding issues. In documents prepared ahead of that meeting by the Council's Italian Presidency, two methods are proposed for identifying the tax base for derivatives.
The first option is a so-called "term-adjusted tax base for derivatives transactions", which would effectively be a contract’s notional value, the documents said. This is similar to the Commission's original proposal, which some member states opposed because it could lead to distortions by penalising certain derivatives instruments. The Council's working group attempts to address this by proposing the tax could be adjusted depending on the maturity and the type of derivative, the documents said. A second method is aimed at linking the taxable base of a contract to the premium that is paid on it, or its market value, for "option-like" contracts. The documents posed questions on both proposals, in an attempt to a "foster a fruitful discussion" at next week's meeting, it said.
The notes read: "The discussions [so far] have shown that it is challenging to identify an appropriate tax base which is at the same time simple to determine and representative of the economic value of the derivative contract." The comments reflect the issues faced by the 11 countries proposing to introduce the FTT under "enhanced cooperation", which allows EU laws to be passed with the backing of at least nine member states. The FTT is currently supported by 11 member states, although one of the countries, Slovenia, is reassessing its involvement.
Full article on Financial News (subscription required)
© Financial News
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article