The European Commission is set to continue with the Financial Transaction Tax (FTT), despite the EU Conuncil legal service, which represents the 28 nations in the EU, opinion that the FTT exceeds “member states’ jurisdiction for taxation under the norms of international customary law”.
Nevertheless, the European Commission has said that work on implementation the tax will continue. Algirdas Semeta, EU tax commissioner, refuted this claim on Twitter writing, “FTT is legally sound and fully complies with EU Treaties and international tax laws.”
While these opinions and Tweets were flying around, EuroTreasurer web-site reported from Italy and France, who have adopted FTT, that:
- “The first stage of Italy’s FTT has widely been blamed for a steep decline in trading. One market observer told EuroTreasurer that there had been a 40% drop. “As usual, the Italians are more royalist than the Queen,” he said, referring to the fact that no other country in Europe, except France, has introduced an FTT. France began levying the continent’s first FTT last year. A report suggests that French equity turnover has declined by over 26% as a result.
That said, corporate treasurers say that the knock-on effects from the new French and Italian tax laws have been limited for them, at least thus far. A treasurer working for a large multinational with operations in Italy and France says there has been “no significant impact for us so far for both countries.” Most market observers seem to agree.”
FTT impact on large companies has been far less than on small and frequent traders because they tend to use large derivatives and hold them for longer.
However, banks and financial services firms still fear that a pan-European FTT would lead to a dramatic increase in the costs of borrowing, hedging and issuing securities still remains.
Hopefully this daft tax will be watered down before it is implemented in nine other countries including France and Germany in middle of 2014.