Under Article 329(1) of the Treaty on the Functioning of the European Union (TFEU), Member States which wish to establish enhanced co-operation in a policy area shall address a request to the Commission specifying the scope and objectives of the enhanced co-operation proposed. Eleven Member States (Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia) have addressed formal requests to the Commission indicating that they wish to establish enhanced cooperation between themselves in the area of a common system of Financial Transaction Tax (FTT) and that the Commission should submit a proposal to the Council to that end. On 23 October 2012 the Commission submitted its proposal for a Council Decision to authorise enhanced cooperation in the area of financial transaction tax. The European Parliament will have to consent to the use of “enhanced co-operation” in this area. It is for the Council Presidency and the European Parliament to decide when they will take their respective votes on the issue. The “enhanced co-operation” member states have requested that the scope and objectives of the revised FTT proposal should be based on the Commission's original proposal of September 2011, although the Commission may decide to adjust some elements to reflect the fact that the FTT will be implemented by fewer than 27 Member States.
The original EU Commission FTT proposal was a residence based tax – that is, a transaction would be subject to the tax if one of the parties was a financial institution which is resident in one of the Member States. I requested the Economic and Social Research Institute (ESRI) and the Central Bank to prepare an assessment of the Commission’s original FTT proposal to implement an FTT in the EU. Sections 2 and 3 of the ESRI/Central Bank report, which was circulated to Oireachtas Members earlier this year, discuss the residence basis of the tax. The Commission proposal did not envisage that the FTT would be charged on an issuance basis – that is, by reference to whether the company whose shares were being transferred, or whose shares were subject to a derivative transaction, was resident or registered in an EU Member State.
The European Parliament has proposed that the FTT should operate on both a residence basis and an issuance basis, so that a transaction would be liable to an FTT if it was carried out by a financial institution in an EU Member State or if it involved a transfer of shares or a derivative transaction related to shares in a company registered in an EU Member State. While the Council (comprising representatives of the EU member state Governments) is obliged to consult the European Parliament before adopting a final position on Commission proposals, the European Parliament specifically does not have co-legislator status for proposals in the taxation area, as it would for example with co-decision proposals in other areas.
There is no revised FTT proposal from the Commission at this point – only a proposal to introduce an FTT by enhanced co-operation, rather than a proposal outlining the shape of the FTT itself. It is therefore not yet clear what form the “enhanced co-operation FTT” will take. I do not propose to request a further analysis unless and until the Commission issues a revised proposal, and any decision to request a further analysis will depend on the form that proposal takes. I do not propose to request an analysis of a measure which has not yet been formally proposed.
As the Deputy is aware, Ireland will not be one of the enhanced co-operation countries but we will continue to monitor discussions on the FTT to ensure the compatibility of any proposed measure with the internal market and with existing taxes on financial transactions, including our Stamp Duty; and with a view to protecting our existing financial services business.
