Global FS tax newsflash: Latest developments on the EU Financial Transaction Tax – deciphering the Brussels labyrinth

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Enhanced cooperation continues to be the most likely way in which certain Member States of the EU will adopt some form of Financial Transaction Tax (FTT). The ECOFIN Council vote on authorising enhanced cooperation is expected soon. After this, negotiations begin on the detailed shape of any EU FTT. The planned implementation date of 1 January 2014 will most likely be delayed and there are good opportunities for lobbying to shape the proposed FTT regimes over the coming months. For enhanced cooperation to proceed, a number of steps must be taken. The European Parliament must first give its formal approval for enhanced cooperation, which is then followed by an authorisation vote in the ECOFIN Council.

The European Commission prepared a draft Council Decision authorising enhanced cooperation and on 30 November 2012, the EU’s Permanent Representatives Committee 1 decided, by simple majority, to send a letter to the European Parliament requesting its consent on the draft.

On 4 December 2012 the European Parliament’s Committee on Economic and Monetary Affairs (“ECON”) adopted its Recommendation on the proposal for a Council Decision authorising enhanced cooperation. This recommendation was formally adopted by the European Parliament in its Plenary Session in Strasbourg on 12 December 2012.

Now that the European Parliament has given its approval, the next step will be for the ECOFIN Council to authorize the start of enhanced cooperation through a qualified majority vote. Whilst it is expected that there will be enough support from the Member States for enhanced cooperation to be approved, a number of Member States have their own individual country concerns which does make the position less clear.

The UK wishes to know, in advance, the precise impact on the City of London or see a (substantive) new Commission draft Directive before it will agree/not vote against the proposals in the ECOFIN vote. Sweden and Malta are also reluctant to agree to the proposal before the impact is known for non-participating Member States.

The Commission, as well as France and Germany, are concerned that the wishes of these non-participating Member States could lead to a potential legal battle if mistakes are made in the enhanced cooperation process, and so the Commission will not present any amended substantive proposal before the ECOFIN vote has taken place.

Read this newsflash for more details.

1 The EU’s Permanent Representatives Committee (COREPER) is made up of the heads or deputy heads of mission from the EU Member States in Brussels whose defined role it is to prepare the agenda for the ministerial Council of the European Union meetings.