(1)

The recent financial crisis has led to debates at all levels about a possible additional tax on the financial sector and in particular a financial transactions tax (FTT). This debate stems from the desire to ensure the financial sector contribute to covering the costs of the crisis and that it is taxed in a fair way vis-à-vis other sectors for the future; to dis-incentivise excessively risky activities by financial institutions; to complement regulatory measures aimed at avoiding future crises and to generate additional revenue for general budgets or specific policy purposes.

(1)

The recent financial crisis has led to debates at all levels about a possible additional tax on the financial sector and in particular a financial transactions tax (FTT). This debate stems from the desire to ensure the financial sector contribute to covering the costs of the crisis and that it is taxed in a fair way vis-à-vis other sectors for the future; to dis-incentivise excessively risky activities by financial institutions; to complement regulatory measures aimed at avoiding future crises and to generate additional revenue for general budgets, inter alia as a contribution to fiscal consolidation, in order to stimulate growth and create jobs , or for specific policy purposes, such as development aid and fighting climate change .

(2)

In order to prevent distortions through measures taken unilaterally by Member States, bearing in mind the extremely high mobility of most of the relevant financial transactions, and thus to ensure the proper functioning of the internal market, it is important that the basic features of a FTT in the Member States are harmonised at Union level. Incentives for tax arbitrage in the Union and allocation distortions between financial markets in the Union, as well as possibilities for double or non taxation should thereby be avoided.

(2)

In order to prevent distortions through measures taken unilaterally by Member States, bearing in mind the extremely high mobility of most of the relevant financial transactions, and thus to ensure the proper functioning of the internal market, it is important that the basic features of FTT in the Member States are harmonised, and this Directive is implemented , at Union level. Incentives for tax arbitrage in the Union and allocation distortions between financial markets in the Union, as well as possibilities for double or non taxation should thereby be avoided. Bearing in mind the ultimate goal of a Union-wide application of FTT, should a group of Member States, including, but not limited to euro area Member States, choose to move faster by means of enhanced cooperation under Article 329 of the Treaty on the Functioning of the European Union, the model developed in this Directive would seem suitable as a basis for implementation within that group of Member States. However, an introduction of FTT in a particularly limited number of Member States could lead to a significant distortion of competition in the internal market and comprehensive measures should be taken in order to ensure that such a move does not negatively affect the functioning of the internal market .

(2a)

In line with the European Council conclusions of 17 June 2010 and taking into account that FTT will truly achieve its objectives if it is introduced at a global level, the Union should lead efforts to reach agreement on FTT at a global level. By means of setting an example for the introduction of FTT, the Union must push resolutely for a global agreement in the relevant international arena, in particular the G20, to establish a common ground for introducing a global FTT. Concrete actions in this direction should be part of the report of the Commission in the framework of the first review of this Directive .

(3)

For the internal market to function properly , FTT should apply to trade in a wide range of financial instruments, including structured products, both in the organised markets and ‘over-the-counter’, as well as to the conclusion and modification of all derivative contracts. For the same reason, it should apply to a broadly determined range of financial institutions.

(3)

In order to reduce the scope for tax avoidance, relocation risk and regulatory arbitrage , FTT should apply to trade in a wide range of financial instruments, including structured products, both in the organised markets and ‘over-the-counter’, as well as to the conclusion and modification of all derivative contracts. For the same reason, it should apply to a broadly determined range of financial institutions. Including the widest possible range of financial instruments and actors should also ensure that the tax burden is equally spread among all actors but relatively higher on more speculative and more disruptive financial transactions. The same result could not be achieved if the scope of FTT were more limited, e.g. if it took the form of a stamp duty, which would place the full tax burden on a much more limited group of instruments traded on regulated markets without fulfilling the aim of curbing excessive and harmful speculation .

(11a)

With a view to strengthening the position of stock exchange trading, which is strictly regulated, controlled and transparent, against unregulated, uncontrolled and less transparent off-exchange trading, Member States should apply lower tax rates to financial transactions on stock exchanges than to off-exchange transactions. This will make it possible to effect a shift in trading from markets with little or no regulation to stock exchanges that are subject to strict regulation and control.

(12)

In order to concentrate the taxation on the financial sector as such rather than on citizens and because financial institutions execute the vast majority of transactions on financial markets, the tax should apply to those institutions, whether they trade in their own name, in the name of other persons, for their on own account or for the account of other persons.

(12)

In order to concentrate the taxation on the financial sector as such rather than on citizens and because financial institutions execute the vast majority of transactions on financial markets, the tax should apply only to those institutions, whether they trade in their own name, in the name of other persons, for their on own account or for the account of other persons.

(13)

Because of the high mobility of financial transactions and in order to help mitigating potential tax avoidance, the FTT should be applied on the basis of the residence principle.

(13)

Because of the high mobility of financial transactions and in order to help mitigating potential tax avoidance and in order to ensure the widest possible coverage of actors and transactions , FTT should be applied on the basis of a very broadly defined residence principle, supplemented by elements of the issuance principle. In addition, for better enforcement of FTT, the ownership principle should apply.

(14)

The minimum tax rates should be set at a level sufficiently high for the harmonisation objective of this Directive to be achieved. At the same time, they have to be low enough so that delocalisation risks are minimised.

(14)

The minimum tax rates should be set at a level sufficiently high for the harmonisation objective of this Directive to be achieved, so that the financial sector makes an appropriate contribution towards the costs of the economic crisis, thus boosting the real economy . At the same time, until the implementation of a uniform global FTT regime , those rates have to be low enough so that delocalisation risks are minimised.

(15a)

Since avoidance, evasion and abuse rates will partly depend on the capability of Member States to verify taxable transactions carried out on a trading venue in a third country, Member States and, where applicable, the Commission should make full use of instruments for cooperation on tax matters established by the OECD, the Council of Europe and other international organisations. If necessary, new bilateral and multilateral cooperative initiatives should be taken in this regard.

(16)

In order to allow the adoption of more detailed rules for determining whether certain financial activities constitute a significant part of an undertaking's activity, so that the undertaking can be considered a financial institution for the purposes of this Directive, as well as more detailed rules regarding protection against tax evasion, avoidance and abuse, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission in respect of specifying the measures necessary to this effect. It is of particular importance that the Commission carries out appropriate consultations during its preparatory work, including at expert level . The Commission, when preparing and drawing-up delegated acts, should ensure a timely and appropriate transmission of relevant documents to the Council.

(16)

In order to allow the adoption of more detailed rules for determining whether certain financial activities constitute a significant part of an undertaking's activity, so that the undertaking can be considered a financial institution for the purposes of this Directive, as well as more detailed rules regarding protection against tax evasion, avoidance and abuse, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission in respect of specifying the measures necessary to this effect. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, particularly with experts, non-governmental organisations (NGOs) and other stakeholders . The Commission, when preparing and drawing-up delegated acts, should ensure a timely and appropriate transmission of relevant documents to the European Parliament and the Council.

(17a)

This Directive does not address the management of revenue from FTT. However, having regard to the Commission proposal for a Council regulation laying down the multiannual financial framework for the years 2014 to 2020 and in particular concerning the provisions on the Union's own resources, part of the revenue from FTT could be managed at Union level, either as a part of Union own resources or directly linked to specific Union policies and public goods. The use of part of revenue from FTT as Union own resources would reduce national contributions to the Union budget and would therefore release funds from the national budgets for other uses.

(17b)

Only Member States are competent to raise tax.

(a)

at least one party to the transaction is established in a Member State and a financial institution established in the territory of a Member State is party to the transaction, acting either for its own account or for the account of another person, or is acting in the name of a party to the transaction; or

(b)

the transaction involves a financial instrument issued by legal entities registered in the Union.

(ca)

(f)

a pension fund or an institution for occupational retirement provision as defined in Article 6(a) of Directive 2003/41/EC of the European Parliament and the Council, an investment manager of such fund or institution;

(f)

a pension fund or an institution for occupational retirement provision as defined in Article 6(a) of Directive 2003/41/EC of the European Parliament and of the Council on the activities and supervision of institutions for occupational retirement provision , an investment manager of such fund or institution, and an entity set up for the purpose of investment of such funds or institutions acting solely and exclusively in the interest of such funds or institutions, shall not be considered a financial institution for the purposes of this Directive until the review of this Directive pursuant to Article 16 ;

(ea)