The financial transaction tax should affect more trades, be harder to avoid and be implemented regardless of whether all 27 EU member states agree to it, according to the European Parliament.
In September, the European Commission proposed imposing a tax of 0.1 per cent on the buying and selling of bonds and shares and a tax of 0.01 per cent on the buying and selling of derivatives. The UK Government has said it will not support an EU wide FTT.
Concerns have been raised the tax would hit pension funds. However, under the text agreed at the EP’s economic and monetary affairs committee pension fund transactions would be exempt.
The committee agreed to keep the Commission’s proposed “residence principle” which would mean shares issued outside the FTT zone but traded by at least one institution established within the zone would be caught. However, the committee also wants an “issuance principle” whereby financial institutions located outside the FTT zone would also be obliged to pay the levy if they traded securities originally issued within this zone.
For example, Siemens shares, issued in Germany and traded between a Hong Kong institution and one in the US would have to pay the tax. Under the Commission’s proposals, such transactions would have escaped the tax, because only financial institutions based within the FTT zone would be subject to it.
In a similar approach to UK stamp duty, the committee wants payment of the FTT linked to the acquisition of legal ownership rights. This means if the buyer of a security did not pay the FTT, he or she would not be legally certain of owning the security and would be unable to clear the trade centrally.
It adds that even if fewer than the 27 member states agree to implement the tax it should still go ahead between those who want it.
The Greek MEP Anni Podimata who is guiding the parliament’s response to the Commission’s proposal says: “The committee has been consistent with what Parliament has been pushing for and I now expect Member States to show the same consistency with their declarations. It is time to change the financial services business model, away from high frequency trading to serving the real economy”.