Financial Transaction Tax must respect EU treaties
17 February 2014 London
Image: Shutterstock
On 18 February, the Economic and Financial Affairs Council will discuss the proposal for an EU11 Financial Transaction Tax (FTT).
This is the first time the proposal is brought to the ministerial level and “reflects the Greek presidency’s desire to make progress towards a political agreement”, said The Law Society, which represents solicitors in England and Wales.
Law Society chief executive Desmond Hudson has written to key European finance ministers to raise the society’s concerns that the proposal does not sufficiently respect the rights and competences of the countries that have chosen not to participate.
“The proposal for a FTT is designed in such a way that financial entities based in non-participating countries, such as the UK, would still be subject to the FTT for a wide range of transactions, including transactions that do not necessarily have a genuine economic link to a participating member state,” said a statement.
Hudson added that, regardless of the potential pros and cons of the tax, he believes that any legislation should respect the EU treaties and the decision by a majority of countries not to participate.
“The point is that the extraterritorial effects of the proposed tax would in effect force a degree of participation on those countries."
The Law Society also has a number of technical concerns. Due to the wide scope of the proposed FTT, it is technically very complex, and it is more likely to get passed onto the end user of financial services.
Gary Richards, chair of the Law Society's tax law committee, said: “To prevent avoidance, the European Commission has proposed that in principle each leg of a transaction is subject to the tax and that each party is jointly and severally liable to pay. Essentially, this means that the costs will be much higher as is the likelihood that the tax will be passed onto non-financial parties, such as businesses, and pension savers.”
This is the first time the proposal is brought to the ministerial level and “reflects the Greek presidency’s desire to make progress towards a political agreement”, said The Law Society, which represents solicitors in England and Wales.
Law Society chief executive Desmond Hudson has written to key European finance ministers to raise the society’s concerns that the proposal does not sufficiently respect the rights and competences of the countries that have chosen not to participate.
“The proposal for a FTT is designed in such a way that financial entities based in non-participating countries, such as the UK, would still be subject to the FTT for a wide range of transactions, including transactions that do not necessarily have a genuine economic link to a participating member state,” said a statement.
Hudson added that, regardless of the potential pros and cons of the tax, he believes that any legislation should respect the EU treaties and the decision by a majority of countries not to participate.
“The point is that the extraterritorial effects of the proposed tax would in effect force a degree of participation on those countries."
The Law Society also has a number of technical concerns. Due to the wide scope of the proposed FTT, it is technically very complex, and it is more likely to get passed onto the end user of financial services.
Gary Richards, chair of the Law Society's tax law committee, said: “To prevent avoidance, the European Commission has proposed that in principle each leg of a transaction is subject to the tax and that each party is jointly and severally liable to pay. Essentially, this means that the costs will be much higher as is the likelihood that the tax will be passed onto non-financial parties, such as businesses, and pension savers.”
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