The Portuguese Presidency of the Council (“the Presidency”) will host on 24 February 2021 a meeting of the Working Party on Tax Questions, the main agenda item of which includes a discussion on the current state of play and on the way forward in respect of the Proposal for a Council Directive implementing enhanced cooperation in the area of financial transaction tax (FTT). By means of background, the 2013 FTT proposal is currently subject to review by 10 Member States participating in the so called enhanced co-operation mechanism (Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain). In a document circulated to the delegations in advance of the meeting, the Presidency sets out a number of policy considerations that are designed to help move the FTT debate forward. Noting the FTT project “enjoys a relative technical and political maturity” and “benefits from the valuable learning experience of several Member States”, notably France and Italy, the Presidency aims to “hold a general conceptual discussion on the design of the FTT in an inclusive format”. The objective being to find a consensus on the FTT technical design, leaving political discussions – such as mutualisation of FTT revenues – for a later stage. In this context, the key issues put forward by the Presidency for discussion among Member States include:

  • Proposition to start testing the FTT design concept at the European level. This will be based on the approaches developed and implemented by France and Italy. This is to lead to the development of an FTT proof-of-concept at the European level. To this end, the Presidency seeks Member States’ views on the proposed approach. Addressing specifically Member States not participating in the enhanced cooperation, the Presidency asks whether the proposed technical approach to the FTT’s design, coupled with a need to find additional financial resources needed to help European recovery from the Covid-19 crisis, would increase their interest for “further work on an inclusive compromise proposal”.
  • Noting the experiences of the French and Italian FTT models, including the application of the issuance principle and certain design features to protect market liquidity (such as applying the FTT on shares issued by companies with a high market-cap value, providing market-making and intraday trading exemptions), the Presidency seeks Member States’ views as to whether this combined experience provides a sufficient basis for the development of a gradual European approach to the FTT.
  • In terms of scope, the Presidency notes the recent ruling of the Court of Justice of the European Union deeming the Italian approach to applying the FTT to equity derivatives as compatible with EU law, and considers that such instruments should be subject to the future European FTT. That said, the Presidency seeks Member States’ views whether they agree with the proposed approach.

Finally, preferring the gradual approach to FTT implementation, the Presidency suggests that such an approach could be structured on the basis of a review clause and with any prospective expansion of the scope being preceded by in-depth analyses. That said, Member States that would want to move faster with expanding the scope of the FTT should be allowed to do this. To this end, the Presidency asks Member States for views regarding the proposed review clause and the minimum harmonisation approach.