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EU lawyers declare FTT illegal
11 September 2013
Legal advice shows tax oversteps treaty boundaries
The controversial financial transaction tax (FTT) to be brought in by 11 European countries has been declared illegal by EU lawyers.
Media reports indicate that a leaked legal opinion by EU lawyers has concluded the FTT "exceeds member states' jurisdiction for taxation under the norms of international customary law" and "infringes upon the taxing competences of non-participating member states".
The EU Council Legal Service's opinion also argued that given the FTT would be implemented by only 11 EU members, it would be "discriminatory and likely to lead to distortion of competition to the detriment of non participating member states".
While the legal opinion does not spell the automatic end of the FTT, moves to press ahead with its introduction could be challenged in court.
The UK has opposed the tax as it will be obliged to collect the levy if UK firms trade with firms domiciled in the FTT zone, which it argued was illegal. That position appears to have been strengthened by the EU legal opinion.
In addition to France and Italy, which have both implemented FTTs, the 11 countries that make up the bloc are Germany, Spain, Belgium, Austria, Portugal, Greece, Slovenia, Slovakia and Estonia.
The tax is scheduled to come into effect in January 2014, although unsolved organisational and operational issues remain, with the European Commission recently suggesting a mid-2014 implementation date as a more realistic option.
Leo Ringer, head of financial services & corporate at the UK's Confederation of British Industry, said: “This opinion recognises that the FTT would have damaging implications for growth, jobs and investment beyond the member states involved, so now is the time to draw a line under this flawed proposal.
"It also makes clear that moves towards further integration between a number of EU countries can’t be taken forward if they impact on the rights of all member states, unless all states affected have signed up.”
The upcoming German federal election on September 22 is likely to impact future implementation of the FTT. Industry participants at a recent Global Investor/ISF summit in Frankfurt suggested the FTT would be watered down if Chancellor Angela Merkel wins the election.