# C_2012113EN.01000701.xml

| 18.4.2012 | EN | Official Journal of the European Union | C 113/7 |
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18.4.2012

EN

Official Journal of the European Union

C 113/7

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Opinion of the Committee of the Regions on ‘a common system of financial transaction tax’

2012/C 113/03

THE COMMITTEE OF THE REGIONS

| — | welcomes the submission of a Commission proposal for a Council directive on a common system of financial transaction tax in the EU, as requested by the CoR in its 2011 work programme; |
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welcomes the submission of a Commission proposal for a Council directive on a common system of financial transaction tax in the EU, as requested by the CoR in its 2011 work programme;

| — | considers the introduction of a European financial transaction tax (FTT) to be a further important step towards the urgently needed re-establishment of the supremacy of democratic politics over the serious discrepancies which have occurred in the functioning of financial markets; |
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considers the introduction of a European financial transaction tax (FTT) to be a further important step towards the urgently needed re-establishment of the supremacy of democratic politics over the serious discrepancies which have occurred in the functioning of financial markets;

| — | highlights that the financial transaction tax is an important tool for ensuring that the financial sector plays its part in achieving greater solidarity and fairness, and for curbing speculation, as the CoR noted in its opinion on the new Multiannual Financial Framework post-2013; |
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highlights that the financial transaction tax is an important tool for ensuring that the financial sector plays its part in achieving greater solidarity and fairness, and for curbing speculation, as the CoR noted in its opinion on the new Multiannual Financial Framework post-2013;

| — | supports the objective of EU-wide application of the planned harmonisation and, should that not prove feasible despite all efforts made, calls for the immediate establishment of a European FTT system using the enhanced cooperation instrument, to encompass the euro area at the very least. |
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supports the objective of EU-wide application of the planned harmonisation and, should that not prove feasible despite all efforts made, calls for the immediate establishment of a European FTT system using the enhanced cooperation instrument, to encompass the euro area at the very least.

| Rapporteur | Ralf CHRISTOFFERS (DE/PES), Minister for Economic and European Affairs of the State of Brandenburg |
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| Reference document | Proposal for a Council Directive on a common system of financial transaction tax and amending Directive 2008/7/EC
  COM(2011) 594 final |

Rapporteur

Ralf CHRISTOFFERS (DE/PES), Minister for Economic and European Affairs of the State of Brandenburg

Reference document

Proposal for a Council Directive on a common system of financial transaction tax and amending Directive 2008/7/EC

COM(2011) 594 final

I.   POLICY RECOMMENDATIONS

POLICY RECOMMENDATIONS

THE COMMITTEE OF THE REGIONS

General message

General message

| 1. | welcomes the submission of a Commission proposal for a Council Directive on a common system of financial transaction tax in the EU, as requested by the CoR in its 2011 work programme; |
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1.

welcomes the submission of a Commission proposal for a Council Directive on a common system of financial transaction tax in the EU, as requested by the CoR in its 2011 work programme;

| 2. | sees it as a strong political signal of the will and readiness of the European Union to meet the challenges of a globalised financial market and to fully strengthen in a lasting way the potential of the national economies for the benefit of the Member States and EU citizens; |
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2.

sees it as a strong political signal of the will and readiness of the European Union to meet the challenges of a globalised financial market and to fully strengthen in a lasting way the potential of the national economies for the benefit of the Member States and EU citizens;

| 3. | considers the introduction of a European financial transaction tax (FTT) to be a further important step towards the urgently needed re-establishment of the supremacy of democratic politics over the serious discrepancies which have occurred in the functioning of financial markets; |
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3.

considers the introduction of a European financial transaction tax (FTT) to be a further important step towards the urgently needed re-establishment of the supremacy of democratic politics over the serious discrepancies which have occurred in the functioning of financial markets;

| 4. | highlights that the financial transaction tax is an important tool for ensuring that the financial sector plays its part in achieving greater solidarity and fairness, and for curbing speculation, as the CoR noted in its opinion on the new Multiannual Financial Framework post-2013; |
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4.

highlights that the financial transaction tax is an important tool for ensuring that the financial sector plays its part in achieving greater solidarity and fairness, and for curbing speculation, as the CoR noted in its opinion on the new Multiannual Financial Framework post-2013;

| 5. | points to the European Commission impact assessment published in September 2011 and the highly imprecise ‧Dynamic Stochastic General Equilibrium (DSGE)‧ models applied; highlights the fact that the Commission impact assessment does not come to strong conclusions but rather keeps the discourse vague and indecisive leaving various options open; concludes that the European Commission impact assessment is biased and imprecise; welcomes the Commission commitment for a new impact assessment to follow; |
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5.

points to the European Commission impact assessment published in September 2011 and the highly imprecise ‧Dynamic Stochastic General Equilibrium (DSGE)‧ models applied; highlights the fact that the Commission impact assessment does not come to strong conclusions but rather keeps the discourse vague and indecisive leaving various options open; concludes that the European Commission impact assessment is biased and imprecise; welcomes the Commission commitment for a new impact assessment to follow;

| 6. | underlines the evident shortcomings in the UK stamp duty system, in particular with regards to inoculating the system against geographic relocation of transactions as well as the strong incentive given to shift towards derivatives; |
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6.

underlines the evident shortcomings in the UK stamp duty system, in particular with regards to inoculating the system against geographic relocation of transactions as well as the strong incentive given to shift towards derivatives;

General political framework

General political framework

| 7. | agrees with the Commission that the proliferation of uncoordinated national tax measures makes harmonisation in this area necessary in order to prevent fragmentation of the internal market in financial services, as well as for the operation of the internal market in this area and the prevention of distortions of competition; |
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7.

agrees with the Commission that the proliferation of uncoordinated national tax measures makes harmonisation in this area necessary in order to prevent fragmentation of the internal market in financial services, as well as for the operation of the internal market in this area and the prevention of distortions of competition;

| 8. | welcomes the Commission's approach to harmonisation,






  — | ensuring that financial institutions are taxed appropriately in relation to other sectors of the economy and in terms of the costs of the recent crisis, and |
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8.

welcomes the Commission's approach to harmonisation,

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ensuring that financial institutions are taxed appropriately in relation to other sectors of the economy and in terms of the costs of the recent crisis, and

| — | that tax mechanisms are created to discourage financial market participants from engaging in transactions which damage the economy as a whole, thus helping to prevent future crises; |
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that tax mechanisms are created to discourage financial market participants from engaging in transactions which damage the economy as a whole, thus helping to prevent future crises;

| 9. | supports the objective of EU-wide application of the planned harmonisation and, should that not prove feasible despite all efforts made, calls for the immediate establishment of a European FTT system using the enhanced cooperation instrument, to encompass the euro area at the very least; |
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9.

supports the objective of EU-wide application of the planned harmonisation and, should that not prove feasible despite all efforts made, calls for the immediate establishment of a European FTT system using the enhanced cooperation instrument, to encompass the euro area at the very least;

| 10. | given the particularly urgent need to introduce a common European FTT system, urges the legislative bodies of the European Union to make every effort, exercising all due care and political responsibility, to bring the legislative process to a speedy conclusion; |
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10.

given the particularly urgent need to introduce a common European FTT system, urges the legislative bodies of the European Union to make every effort, exercising all due care and political responsibility, to bring the legislative process to a speedy conclusion;

| 11. | welcomes the fact that application of the directive will be subject to ongoing, structured monitoring procedures through the Commission's regular reporting obligation; regrets, however, that the Commission is required to report only to the Council, as this fails to take account of the Parliament's role in the legislative procedure, under which the directive is adopted by the Council with the participation of the European Parliament; also considers that this restriction undervalues the role of the Committee of the Regions, as the European Union's assembly of local and regional authorities, and the European Economic and Social Committee, whose main task under the Treaty is to advise the legislative institutions; |
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11.

welcomes the fact that application of the directive will be subject to ongoing, structured monitoring procedures through the Commission's regular reporting obligation; regrets, however, that the Commission is required to report only to the Council, as this fails to take account of the Parliament's role in the legislative procedure, under which the directive is adopted by the Council with the participation of the European Parliament; also considers that this restriction undervalues the role of the Committee of the Regions, as the European Union's assembly of local and regional authorities, and the European Economic and Social Committee, whose main task under the Treaty is to advise the legislative institutions;

| 12. | highlights the need to take particular account of the possible consequences of introducing a common financial transaction tax system on the tax revenues of municipalities and regions; |
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12.

highlights the need to take particular account of the possible consequences of introducing a common financial transaction tax system on the tax revenues of municipalities and regions;

Purpose and scope of the financial transaction tax

Purpose and scope of the financial transaction tax

| 13. | supports the linking of the taxation obligation to the financial institution's country of residence; this regulatory approach reduces opportunities for tax avoidance and better reflects the links between the financial markets and the real economy than would be the case if the tax obligation were to depend on the location of the transaction; refers to the need to also provide for rules that prevent or curb tax avoidance by way of relocation or spin-offs; |
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13.

supports the linking of the taxation obligation to the financial institution's country of residence; this regulatory approach reduces opportunities for tax avoidance and better reflects the links between the financial markets and the real economy than would be the case if the tax obligation were to depend on the location of the transaction; refers to the need to also provide for rules that prevent or curb tax avoidance by way of relocation or spin-offs;

| 14. | suggests that both "financial institutions" and "financial instruments" be defined in detail; |
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14.

suggests that both "financial institutions" and "financial instruments" be defined in detail;

| 15. | supports the broad scope of application of the FTT, which applies in principle to all kinds of transactions in financial instruments, including possible substitutes and over-the-counter (OTC) transactions; |
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15.

supports the broad scope of application of the FTT, which applies in principle to all kinds of transactions in financial instruments, including possible substitutes and over-the-counter (OTC) transactions;

| 16. | endorses the exemption from the FTT of primary market transactions, as this will reduce undesirable effects of the tax on the real economy; regrets, however, that government secondary market transactions are not exempted, as governments are obliged to have recourse to financial instruments on the secondary markets for the conduct of fiscal policy; |
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16.

endorses the exemption from the FTT of primary market transactions, as this will reduce undesirable effects of the tax on the real economy; regrets, however, that government secondary market transactions are not exempted, as governments are obliged to have recourse to financial instruments on the secondary markets for the conduct of fiscal policy;

| 17. | regrets that not all kinds of currency transactions will be subject to the financial transaction tax, entailing the loss of significant potential revenues while also reducing the FTT's regulatory impact; in particular, considers that taxation of currency transactions within the framework of a comprehensive financial transaction tax does not impinge upon freedom of movement of capital, as the FTT, in view of its broad scope of application, would not target the cross-border dimension of currency transactions but simply tax them on the same basis as any other financial transaction; |
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17.

regrets that not all kinds of currency transactions will be subject to the financial transaction tax, entailing the loss of significant potential revenues while also reducing the FTT's regulatory impact; in particular, considers that taxation of currency transactions within the framework of a comprehensive financial transaction tax does not impinge upon freedom of movement of capital, as the FTT, in view of its broad scope of application, would not target the cross-border dimension of currency transactions but simply tax them on the same basis as any other financial transaction;

| 18. | believes that special credit institutions that lend only to the public sector should be exempt from the financial transaction tax; |
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18.

believes that special credit institutions that lend only to the public sector should be exempt from the financial transaction tax;

Taxable amount, structure and rate of the FTT

Taxable amount, structure and rate of the FTT

| 19. | welcomes in principle the proposed method for establishing the taxable amount, including the use of the notional amount as the taxable amount in the case of derivatives; sees a need for clarification, however, particularly as regards ways of countering the real danger of the notional amounts being artificially reduced in the case of complex derivatives; |
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19.

welcomes in principle the proposed method for establishing the taxable amount, including the use of the notional amount as the taxable amount in the case of derivatives; sees a need for clarification, however, particularly as regards ways of countering the real danger of the notional amounts being artificially reduced in the case of complex derivatives;

| 20. | welcomes the fact that the rates proposed are minimum rates, allowing the Member States to set higher rates, which is fully in keeping with the subsidiarity principle; at the same time, however, requests that measures to implement the directive check whether higher tax rates in certain Member States do not in fact generate the kind of damaging tax competition between Member States which the directive was specifically supposed to prevent; |
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20.

welcomes the fact that the rates proposed are minimum rates, allowing the Member States to set higher rates, which is fully in keeping with the subsidiarity principle; at the same time, however, requests that measures to implement the directive check whether higher tax rates in certain Member States do not in fact generate the kind of damaging tax competition between Member States which the directive was specifically supposed to prevent;

| 21. | refers to the need to treat all financial instruments subject to taxation equally in substantive terms, while taking into account actual differences in order to prevent unintended loopholes and to give sufficient consideration to the principle of fairness in taxation; therefore calls for the tax rates applied to shares, bonds and derivatives to be reviewed in light of the aforementioned considerations; |
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21.

refers to the need to treat all financial instruments subject to taxation equally in substantive terms, while taking into account actual differences in order to prevent unintended loopholes and to give sufficient consideration to the principle of fairness in taxation; therefore calls for the tax rates applied to shares, bonds and derivatives to be reviewed in light of the aforementioned considerations;

Payment of the FTT

Payment of the FTT

| 22. | is critical of the powers to be conferred on the Commission under Article 290 TFEU to adopt delegated legal acts specifying the measures to be adopted by the Member States to prevent tax evasion, avoidance and abuse; measures to ensure effective implementation of the directive fall within the ambit of the Member States, which under Article 291(1) TFEU are required to adopt all measures of national law necessary to implement legally binding Union acts; a corresponding delegation of responsibility to the Commission would be allowed only if uniform implementing conditions were needed for this purpose; in that case, however, the adoption of implementing legislation under Article 291 TFEU would be the instrument provided for by the Treaty; however, most aspects of issues of fundamental importance, especially those concerning criminal penalties, should be left completely up to Member States; |
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22.

is critical of the powers to be conferred on the Commission under Article 290 TFEU to adopt delegated legal acts specifying the measures to be adopted by the Member States to prevent tax evasion, avoidance and abuse; measures to ensure effective implementation of the directive fall within the ambit of the Member States, which under Article 291(1) TFEU are required to adopt all measures of national law necessary to implement legally binding Union acts; a corresponding delegation of responsibility to the Commission would be allowed only if uniform implementing conditions were needed for this purpose; in that case, however, the adoption of implementing legislation under Article 291 TFEU would be the instrument provided for by the Treaty; however, most aspects of issues of fundamental importance, especially those concerning criminal penalties, should be left completely up to Member States;

| 23. | stresses that the need for, and efficiency of, measures adopted by the Commission in accordance with this delegation of powers should also be a mandatory part of the Commission's regular reports on implementation of the directive; |
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23.

stresses that the need for, and efficiency of, measures adopted by the Commission in accordance with this delegation of powers should also be a mandatory part of the Commission's regular reports on implementation of the directive;

Use of the proceeds of the FTT

Use of the proceeds of the FTT

| 24. | argues for the tax to be incorporated into the system of EU own resources as a new category and for its proceeds to be distributed between the Union and the Member States collecting the tax on a proportional basis, thus enabling the Member States' contributions to the system of own resources to be reduced in line with the amount of revenue realised from the FTT; |
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24.

argues for the tax to be incorporated into the system of EU own resources as a new category and for its proceeds to be distributed between the Union and the Member States collecting the tax on a proportional basis, thus enabling the Member States' contributions to the system of own resources to be reduced in line with the amount of revenue realised from the FTT;

Need for further measures

Need for further measures

| 25. | sees the need, in addition to the establishment of a European FTT system, for a more comprehensive reform of the conditions under which the financial markets operate in the EU, to allow any negative effects that they may have on the real economy to be counteracted; |
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25.

sees the need, in addition to the establishment of a European FTT system, for a more comprehensive reform of the conditions under which the financial markets operate in the EU, to allow any negative effects that they may have on the real economy to be counteracted;

| 26. | points out that for this reason it would be advisable to ensure the appropriate collection and management of the information generated by an FTT; |
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26.

points out that for this reason it would be advisable to ensure the appropriate collection and management of the information generated by an FTT;

| 27. | is convinced that, in order to meet the challenges of a functioning internal market and economic and monetary union with a single currency, further measures are urgently needed going beyond the fiscal policy sector, ranging from significant strengthening of European coordination of national economic and fiscal policies to effective, institutionalised and democratically legitimate EU-level economic guidance; |
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27.

is convinced that, in order to meet the challenges of a functioning internal market and economic and monetary union with a single currency, further measures are urgently needed going beyond the fiscal policy sector, ranging from significant strengthening of European coordination of national economic and fiscal policies to effective, institutionalised and democratically legitimate EU-level economic guidance;

| 28. | believes that, going beyond this European initiative, globally coordinated action is needed, and therefore calls on the EU and the Member States to work at international level in the field of external relations with non-EU countries for a reform of financial market rules covering all G20 states and a comprehensive tax on financial transactions. |
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28.

believes that, going beyond this European initiative, globally coordinated action is needed, and therefore calls on the EU and the Member States to work at international level in the field of external relations with non-EU countries for a reform of financial market rules covering all G20 states and a comprehensive tax on financial transactions.

II.   RECOMMENDATIONS FOR AMENDMENTS

RECOMMENDATIONS FOR AMENDMENTS

Amendment 1

Amendment 1

Article 1(4)(d)

| Text proposed by the Commission | CoR amendment |
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| (d) | transactions with the central banks of Member States. |

Text proposed by the Commission

CoR amendment

(d)

transactions with the central banks of Member States.

| (d) | transactions with the , central banks of Member States, |
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(d)

transactions with the , central banks of Member States,

Amendment 2

Amendment 2

Article 16

| Text proposed by the Commission | CoR amendment |
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| Every five years and for the first time by 31 December 2016, the Commission shall submit to the Council a report on the application of this Directive and, where appropriate, a proposal for its modification. | Every five years and for the first time by 31 December 2016, the Commission shall submit to the Council a report on the application of this Directive and, where appropriate, a proposal for its modification. |
| In that report the Commission shall, at least, examine the impact of the FTT on the proper functioning of the internal market, the financial markets and the real economy and it shall take into account the progress on taxation of the financial sector in the international context. | In that report the Commission shall, at least, examine the impact of the FTT on the proper functioning of the internal market, the financial markets and the real economy and it shall take into account the progress on taxation of the financial sector in the international context. |

Text proposed by the Commission

CoR amendment

Every five years and for the first time by 31 December 2016, the Commission shall submit to the Council a report on the application of this Directive and, where appropriate, a proposal for its modification.

Every five years and for the first time by 31 December 2016, the Commission shall submit to the Council a report on the application of this Directive and, where appropriate, a proposal for its modification.

In that report the Commission shall, at least, examine the impact of the FTT on the proper functioning of the internal market, the financial markets and the real economy and it shall take into account the progress on taxation of the financial sector in the international context.

In that report the Commission shall, at least, examine the impact of the FTT on the proper functioning of the internal market, the financial markets and the real economy and it shall take into account the progress on taxation of the financial sector in the international context.

Brussels, 15 February 2012.

The President of the Committee of the Regions

Mercedes BRESSO

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