(1)

In 2011, the Commission took note of a debate on-going at all levels on additional taxation of the financial sector. The debate originates from the desire to ensure that the financial sector fairly and substantially contributes to 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)

In 2011, the Commission took note of a debate on-going at all levels on additional taxation of the financial sector. The debate originates from the desire to ensure that the financial sector fairly and substantially contributes to 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 reducing speculation, and to generate additional revenue for general budgets , inter alia as a contribution to fiscal consolidation or specific policy purposes towards sustainability and the stimulation of growth, education and employment with particular focus on youth employment . The introduction of a financial transaction tax (FTT) thus shows a positive distribution and steering capacity by appropriately supplementing existing regulatory reform initiatives.

(1a)

According to the European Council's conclusions of 8 February 2013 on the Multiannual Financial Framework 2014-2020, part of the revenues from FTT should be allocated to the Union budget as genuine own resources. The use of FTT revenue as Union own resources is possible under the enhanced cooperation procedure only if national contributions of participating Member States to the Union budget would be reduced by the same amount and would avoid the disproportionate contribution by participating Member States compared to non-participating Member States. Once FTT is implemented at Union level, all or part of the amount of the own resources originating from FTT should be added to the national contributions of the Member States in order to gather new funding sources for European investment without a reduction of the national contributions of the participating Member States to the Union budget..

(1b)

Prior to the introduction of FTT the Commission should demonstrate that enhanced cooperation will not undermine the internal market or economic, social and territorial cohesion. It should also demonstrate that it neither constitutes a barrier to, or discrimination in relation to, trade between Member States, nor distorts competition between them. The Commission should present a new robust analysis and impact assessment, of the consequences the proposal for a common FTT on participating and non-participating Member States and on the internal market as a whole.

(2a)

FTT will truly achieve its objectives only if it is introduced at global level. The enhanced cooperation of 11 Member States therefore constitutes a first step towards FTT at Union-level and, ultimately, at a global level. The Union will continuously advocate the global introduction of FTT and will urge for FTT to be put on the agenda of G-20 and G-8 summits.

(3)

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

(3)

Several of the 11 participating Member States have already established, or are in the process of establishing, a form of FTT. In order to prevent distortions through measures taken unilaterally by the participating Member States, bearing in mind the extremely high mobility of most of the relevant financial transactions, and thus to improve the proper functioning of the internal market, it is important that the basic features of a FTT in the participating Member States are harmonised at Union level. Incentives for tax arbitrage between the participating Member States and allocation distortions between financial markets in those States, as well as possibilities for double or non-taxation should thereby be avoided.

(3a)

In light of the substantial progress with regard to European financial market regulation, such as Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012  (1) , Directive 2013/36/EU and this Directive, participating Member States that have introduced banking levies in light of the recent financial crisis should review the necessity of such taxes and their compatibility with the rules and the aims of Union law and the internal market.

(3b)

Any harmonisation of FTT amongst participating Member States should not result in extra-territorial taxation infringing the potential tax base of non-participating Member States.

(4)

The improvement of the operation of the internal market, in particular the avoidance of distortions between the participating Member States requires that a FTT applies to a broadly determined range of financial institutions and transactions, 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 of all derivative contracts and to material modifications of the operations concerned.

(4)

The improvement of the operation of the internal market, in particular the avoidance of distortions between the participating Member States , the reduction of the possibility for tax fraud, tax evasion and aggressive tax planning, the risk of relocation of risk and regulatory arbitrage, requires that FTT should apply to a broadly determined range of financial institutions and transactions, 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 of all derivative contracts , including contracts for difference, currency spot exchange markets and speculative forward transactions, and to material modifications of the operations concerned.

(8)

With the exception of the conclusion or material modification of derivative contracts, the trade on primary markets and transactions relevant for citizens and businesses such as conclusion of insurance contracts, mortgage lending, consumer credits or payment services should be excluded from the scope of FTT, so as not to undermine the raising of capital by companies and governments and to avoid impact on households.

(8)

With the exception of the conclusion or material modification of derivative contracts, the trade on primary markets and transactions relevant for citizens and businesses such as conclusion of insurance contracts, mortgage lending, consumer credits or payment services should be excluded from the scope of FTT, so as not to undermine the raising of capital by companies and governments and to avoid a negative impact on households and the real economy .

(13a)

With a view to strengthening the position of regulated markets, and in particular of stock exchange trading, which is strictly regulated, controlled and transparent, as opposed to unregulated, less controlled and less transparent over-the-counter (OTC) trading, Member States should apply higher tax rates to OTC transactions. This will make it possible to effect a shift in trading from markets with little or no regulation to regulated markets. The higher rates should not apply to financial transactions of OTC derivatives where they objectively reduce risks and therefore serve the real economy.

(15a)

Non-financial enterprises execute significant transactions on financial markets in order to reduce risks directly associated with their commercial business. FTT should not apply to those institutions when they execute such transactions. However, where non-financial enterprises engage in speculative transactions that are not associated with the reduction of risk in their commercial activities, they should be treated as financial institutions and FTT should apply to them.

(15b)

In order to make tax avoidance a high-cost and low-profit venture and to ensure better enforcement, the residence and issuance principle should be complemented by the ‘transfer of legal title principle’.

(15c)

Where appropriate, the Commission should enter into negotiations with third countries in order to facilitate the collection of FTT. The Commission should also revise its definition of uncooperative jurisdictions and should update its action plan against tax fraud, tax evasion and aggressive tax planning accordingly.

(16)

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

(19)

In order to prevent tax fraud and evasion the participating Member States should be obliged to adopt appropriate measures.

(19)

In order to prevent tax fraud , tax evasion and aggressive tax planning, such as substitution, the participating Member States should be obliged to adopt appropriate measures.

(19a)

The Commission should establish an expert working group (FTT Committee) comprising representatives from all Member States, the Commission, the European Central Bank (ECB) and the European Supervisory Authority (European Securities and Markets Authority) (ESMA) to assess the effective implementation of this Directive and prevent tax fraud, tax evasion and aggressive tax planning and to preserve the integrity of the internal market. The FTT Committee should supervise financial transactions in order to detect abusive arrangements as defined in Article 14, to propose countermeasures in a duly manner and to coordinate the implementation of those countermeasures at national level if required. It should make full use of Union law in the field of taxation and financial services regulation and of the instruments for cooperation on tax matters established by international organisations including the OECD and the Council of Europe. Where appropriate, the representatives of the participating Member States should be able to form a sub-group in order to address matters that do not affect the non-participating Member States regarding implementation of FTT.

(19b)

Member States have an obligation to cooperate at administrative level in the field of taxation pursuant to Directive 2011/16/EU and to give each other mutual assistance for the recovery of claims relating to taxes, duties and other measures pursuant to Directive 2010/24/EU.

(21)

In order to allow the adoption of more detailed rules in certain technical areas, regarding registration, accounting, reporting obligations and other obligations intended to ensure that FTT due to the tax authorities is effectively paid to the tax authorities, and their timely adaptation as appropriate, 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.

(21)

In order to allow the adoption of more detailed rules in certain technical areas, regarding registration, accounting, reporting obligations and other obligations intended to ensure that FTT due to the tax authorities is effectively paid to the tax authorities, and their timely adaptation as appropriate, 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 simultaneous, timely and appropriate transmission of relevant documents to the European Parliament and to the Council.

(c)

the conclusion of derivatives contracts before netting or settlement;

(c)

the conclusion of derivatives contracts , including contracts for difference and speculative forward transactions, before netting or settlement;

(ca)

currency spots on the foreign exchange markets;

(e)

a repurchase agreement, a reverse repurchase agreement, a securities lending and borrowing agreement;

(e)

a repurchase agreement, a reverse repurchase agreement, a securities lending and borrowing agreement , including cancelled orders made when engaging in high-frequency trading ;

(i)

it uses co-location facilities, direct market access or proximity hosting;

(ii)

it relates to a daily portfolio turnover of at least 50 %;

(iii)

the proportion of orders cancelled (including partial cancellations) exceeds 20 %;

(iv)

the majority of positions taken are unwound within the same day;

(v)

over 50 % of the orders or transactions made on trading venues offering discounts or rebates to orders which provide liquidity are eligible for such rebates.

(d)

where the average annual value of financial transactions in two consecutive calendar years does not exceed fifty per cent of the overall average net annual turnover, as defined in Article 28 of Directive 78/660/EEC, the undertaking, institution, body or person concerned shall be entitled, upon request, to be considered as not being or no longer being a financial institution.

(d)

where the average annual value of financial transactions in two consecutive calendar years does not exceed 20 % of the overall average net annual turnover, as defined in Article 28 of Directive 78/660/EEC, the undertaking, institution, body or person concerned shall be entitled, upon request, to be considered as not being or no longer being a financial institution.

(da)

the calculation of the average annual value of financial transactions referred to in that point shall not take account of financial transactions concerning non-OTC derivative contracts which meet one of the criteria referred to in Article 10 of Commission Delegated Regulation (EU) No 149/2013 of 19 December 2012 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council with regard to regulatory technical standards on indirect clearing arrangements, the clearing obligation, the public register, access to a trading venue, non-financial counterparties, and risk mitigation techniques for OTC derivatives contracts not cleared by a CCP  (2) .

(a)

Central Counter Parties (CCPs) where exercising the function of a CCP;

(a)

Central Counter Parties (CCPs) where exercising the function of a CCP, or other clearing houses, settlement agents or systems, as defined in Directive 98/26/EC, where exercising their function of clearing, including any possible novation, or settlement;

(ca)

SME growth markets;

(cb)

A person who holds himself out on the financial markets on a continuous basis as being willing to deal on own account by buying and selling financial instruments against his proprietary capital (market maker),when performing an essential function with regard to illiquid bonds and shares in his role of liquidity provider, as provided for in the agreement between the market maker and the organised venue where the financial transaction is carried out, where that transaction is not part of a high-frequency trading strategy.

(ga)

the transfer of the right to dispose of a financial instrument as owner and any equivalent operation implying the transfer of the risk associated with the financial instrument between entities of a group or between entities of a network of decentralised banks, where these transfers are carried out in order to fulfil a legal or prudential liquidity requirement that is set by national or Union law.

(ea)

it is a branch of an institution established in a participating Member State pursuant to point (c);

(g)

it is party, 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, to a financial transaction in a structured product or one of the financial instruments referred to in Section C of Annex I of Directive 2004/39/EC issued within the territory of that Member State , with the exception of instruments referred to in points (4) to (10) of that Section which are not traded on an organised platform .

(g)

it is party, 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, to a financial transaction in a structured product or one of the financial instruments referred to in Section C of Annex I of Directive 2004/39/EC issued within the territory of that Member State.

(a)

it is a security or a derivative relating to such security and the registered office of the issuer of the security is located in that Member State;

(b)

it is a derivative other than one referred to in point (a) and is admitted to trading in an organised platform and the public law governing the trading conducted under the systems of the platform is the law of that Member State;

(c)

it is a financial instrument other than one referred to in point (a) or (b), which is cleared by a CCP or other clearing houses or settlement agents or systems as defined by Directive 98/26/EC where the law governing the CCP or the system concerned is the law of that Member State;

(d)

it is a financial instrument other than one referred to in point (a), (b) or (c), and the applicable law relating to the agreement under which the transaction in the relevant financial instrument has been carried out is the law of that Member State;

(e)

it is a structured instrument and at least 50 % of the value of assets backing the structured instrument are referring to financial instruments issued by a legal person that is registered in a participating Member State.

(a)

0,1 % in respect of the financial transactions referred to in Article 6;

(a)

0,1 % in respect of the financial transactions referred to in Article 6 except for those referred to in point (5) of Article 2(1). with a maturity of up to three months ;

(b)

0,01 % in respect of financial transactions referred to in Article 7.

(b)

0,01 % in respect of financial transactions referred to in Article 7;

(ba)

0,01 % in respect of the financial transactions referred to in point (5) of Article 2(1) with a maturity of up to three months.