FTT negotiations in decision phase – but will take time

There are still contradictory media reports on the state of the negotiations on a Financial Transaction Tax (FTT) in the EU (for background, see February 2015 Newsletter). Often, there is pure speculation or sometimes attempts to root for vested interests of the finance lobby, declaring the FTT to be dead. Such rumours are groundless.

Here is some information based on reliable sources from inside the negotiations:

• Negotiations are in the decision phase. After Austria has taken over, the political coordination of the group and Portugal are providing technical input and there is now a structured list of the main issues to be discussed.
• Although there is now consensus to go for a broad-based FTT including derivatives, there are still some controversial points, such as whether the residence principle, the issuing principle or a combination of both should be applied. In addition, France does not want to tax intra-day trade and only levy the tax at the point of settlement. Furthermore, exceptions for derivatives and market-making activities are being discussed.
• The balance of power is characterised by two blocks: Austria and Germany stand for a strong FTT, France and to a certain extent Italy and Spain advocate a weaker tax. The smaller countries are mainly interested in substantial revenues, though these are only possible if there is a strong tax.

This configuration is leading to complex and protracted negotiations and the need for compromise on many details. Therefore, neither the ambitious draft directive of the Commission nor the French idea of a mini tax will come through in the end, but rather something in between. This also means that the negotiations will need more time than initially expected. A final decision might therefore only be possible by summer 2016.