Proposal for a COUNCIL DECISION authorising enhanced cooperation in the area of financial transaction tax
Date: 2012-10-25
Institutions: European Commission
Subjects: Austria, Belgium, Estonia, European tax cooperation, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia, Spain, financial legislation, financial transaction, tax system

EUROPEAN 
COMMISSION 

Strasbourg, 23.10.2012  
COM(2012) 631 final 

2012/0298 (APP) 

Proposal for a 

COUNCIL DECISION 

authorising enhanced cooperation in the area of financial transaction tax 

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EXPLANATORY MEMORANDUM 

1. 

INTRODUCTION 

On  28  September  2011,  the  Commission  adopted  a  proposal1  for  a  Council  Directive  on  a 
common system of financial transaction tax (FTT) and amending Directive 2008/7/EC2.  

The legal basis for the proposed Council Directive was Article 113 TFEU, as the Commission 
proposed provisions for the harmonisation of legislation concerning the taxation of financial 
transactions to the extent necessary to ensure the proper functioning of the internal market for 
transactions in financial  instruments  and to avoid distortion of competition.  This legal  basis 
prescribes  Council  unanimity  in  accordance  with  a  special  legislative  procedure,  after 
consulting the European Parliament and the Economic and Social Committee.  

The proposal aimed at  

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harmonising legislation concerning indirect taxation on financial transactions, which 
is needed to ensure the proper functioning of the internal market for transactions in 
financial  instruments  and  to  avoid  distortion  of  competition  between  financial 
instruments,  actors  and  market  places  across  the  European  Union,  and  at  the  same 
time 

ensuring  that  financial  institutions  make  a  fair  and  substantial  contribution  to 
covering  the  costs  of  the  recent  crisis  and  creating  a  level  playing  field  with  other 
sectors from a taxation point of view3, and  

creating appropriate disincentives for transactions that do not enhance the efficiency 
of  financial  markets  thereby  complementing  regulatory  measures  to  avoid  future 
crises. 

While already before the onset of the financial and economic crisis some Member States had 
taxes  only  on  some  financial  transactions  in  place,  several  others  have  decided  or  made 
known their intention to either introduce such a tax, broaden the scope of their existing FTT 
and/or  increase  the  tax  rates  so  as  to  ensure  that  financial  institutions  make  a  fair  and 
substantial contribution to covering the costs of the recent crisis, and for consolidating public 
budgets. 

In  this  context  the  efficient  functioning  of  the  internal  market  (for  financial  services  in 
essence)  required  action  intended  to  avoid  distortion  of  competition  across  borders,  and 
among products and actors. Such positive effects, as well as considerations of tax neutrality 
required harmonisation with a broad scope, notably to also cover very mobile products such 
as derivatives, mobile actors and market places. 

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3 

COM(2011) 594. 
Council Directive 2008/7/EC of 12 February 2008 concerning indirect taxes on the raising of capital. 
Financial  institutions,  either  directly  or  indirectly,  largely  benefited  from  the  rescue  and  guarantee 
operations  (pre-)financed  by  the  European  taxpayer  in  the  course  of  2008  to  2012.  These  operations, 
together with the faltering of economic activity caused by the spread of uncertainty about the stability of 
the  overall  economic  and  financial  system  have  triggered  deterioration  in  the  public  finance  balances 
across Europe. Also, most financial and insurance services are exempted from VAT. 

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In 2011, therefore, the Commission tabled the above mentioned proposal for a Directive on a 
common system of FTT. That proposal set out the essential features of such a common system 
for a broad based FTT in the EU that aims at achieving these objectives. It was conceived so 
as to minimise the risk of relocation. 

The  European  Parliament  delivered  its  favourable  opinion  on  23  May  20124,  and  the 
Economic  and  Social  Committee  on  29  March  20125.  Moreover,  also  the  Committee  of 
Regions adopted a favourable opinion on 15 February 20126. 

The proposal and variants thereof were extensively discussed in the meetings of the Council, 
which  started  under  the  Polish  Presidency7  and  continued  at  an  accelerated  pace  under  the 
Danish Presidency, but failed to get the required unanimous support because of fundamental 
and un-bridgeable differences amongst Member States. 

At  the  Council  meetings  of  22  June  and  10  July  2012,  it  was  ascertained  that  essential 
differences in opinion persist as regards the need to establish a common system of FTT at EU 
level  and  that  the  principle  of  harmonised  tax  on  financial  transactions  will  not  receive 
unanimous support within the Council in the foreseeable future. 

It  follows  from  the  above  that  the  objectives  of  a  common  system  of  FTT,  as  discussed  in 
Council upon the Commission's initial proposal, cannot be attained within a reasonable period 
by the Union as a whole. 

In these circumstances, ten Member States (Belgium, Germany, Greece, Spain, France, Italy, 
Austria, Portugal, Slovenia and Slovakia) have addressed formal requests to the Commission 
by letters received between 28 September and 22 October 2012 indicating that they wish to 
establish  enhanced  cooperation  between  themselves  in  the  area  of  the  establishment  of  a 
common system of FTT and that the Commission should submit a proposal to the Council to 
that end. They specified that the scope and objectives should be based on the Commission's 
proposal  of  September  2011  for  a  Council  Directive  on  a  common  system  of  financial 
transaction  tax.  Reference  was  also  made  in  particular  to  the  need  to  avoid  evasive  actions, 
distortions and transfers to other jurisdictions. 

This proposal for a Council Decision authorising enhanced cooperation in the area of FTT is 
the Commission's response to these requests for enhanced cooperation. 

2. 

LEGAL BASIS FOR THE ENHANCED COOPERATION 

Enhanced cooperation is regulated by Article 20 of the Treaty on European Union (TEU) and 
Articles 326 to 334 of the Treaty on the Functioning of the European Union (TFEU). 

This proposal of the Commission for a Council Decision authorising enhanced cooperation in 
the area of FTT is based on Article 329(1) TFEU.  

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P7_TA-(2012)0217. 
ECO/321 – CESE 818/2012 (OJ C 181, 21.06.2012, p. 55). 
CDR 332/2011 (OJ C 113, 18.04.2012, p. 7). 
FTT was first on the agenda of the Council on Economic and Financial Affairs on 8 November 2011 
and  then  at  three  subsequent  meetings  in  March,  June  and  July  2012.  From  December  2011  to  June 
2012 seven Council Working Party meetings on Tax Questions – Indirect taxation were devoted to the 
subject. 

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3. 

MEASURES FORESEEN WITH A VIEW TO IMPLEMENTING ENHANCED 
COOPERATION 

The  present  proposal  for  a  Council  Decision  concerns  the  authorisation  of  enhanced 
cooperation  in  the  area  of  FTT.  A  proposal  for  specific  measures  implementing  such 
enhanced cooperation – i.e., on substance, for a Directive on a common system of FTT – will 
be submitted in due course. This proposal will be largely based on the original Commission 
proposal, in terms of scope and objectives.  

4. 

ASSESSMENT  OF  THE  LEGAL  CONDITIONS  FOR  ENHANCED 
COOPERATION 

4.1. 

Area covered by the Treaty 

Article 329(1) TFEU lays down that enhanced cooperation can be established "in one of the 
areas covered by the Treaties". This requirement is fulfilled. 

First,  a  common  system  of  FTT  as  contemplated  by  the  Commission  proposal  and  in  the 
discussions held in Council is covered by the Treaties, as an instance of harmonised indirect 
taxation  within  the  meaning  of  Article  113  TFEU.  According  to  this  provision,  the  Council 
may  adopt  provisions  which,  as  the  common  system  thus  proposed  and  discussed,  are 
necessary  to  ensure  the  functioning  of  the  internal  market  and  to  avoid  distortion  of 
competition. 

Second, a common FTT scheme like the one in question is sufficiently broad to be considered 
as corresponding to an "area" covered by the Treaties, in which enhanced cooperation may be 
established. The essential framework would harmonise the structure of the tax and provide for 
minimum rates. It would also attribute taxing rights as between Member States, notably with a 
view to avoid double taxation or double non-taxation, harmonise chargeability and designate 
the debtors of the tax. It would finally contain various elements intended to ensure that the tax 
is effectively collected in all Member States. 

Article 20(1) TEU lays down that enhanced cooperation can only be established "within the 
framework  of  the  Union's  non-exclusive  competences".  The  competence  granted  by  Article 
113 TFEU concerns the establishment and proper functioning of the internal market which is 
a shared, i.e. non-exclusive competence (Article 3 and 4(2) TFEU). 

4.2. 

Authorising  decision  as  last  resort  and  participation  of  at  least  nine  Member 
States 

Article 20(2) TEU lays down that a decision authorising enhanced cooperation can be adopted 
by  the  Council  only  as  a  last  resort,  when  it  has  established  that  the  objectives  of  such 
cooperation cannot be attained within a reasonable period by the Union as a whole, and that at 
least nine Member States participate in it. 

Already during the first relevant meeting of the Council on Economic and Financial Affairs of 
8 November 2011, some Member States declared that they were against any common system 
of financial transaction tax at the level of the European Union unless an FTT of similar kind 
were introduced at the global level. At that stage, one Member State proposed to vote on the 
proposal in order to spare any future discussion regarding harmonised FTT at European level. 

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During the seven Council "Working Party meetings on Tax Questions – Indirect Tax (FTT)", 
first  under  the  Polish  and  then  under  the  Danish  Presidency,  in  which  also  numerous 
alternative  design  features  of  an  FTT  based  on  the  Commission  proposal  were  tabled, 
examined  and discussed,  it  was  confirmed that  unanimous  support  for  a  common  system  of 
FTT,  be  it  along  the  lines  of  the  Commission  proposal  or  any  variant  thereof,  could  not  be 
reached at the level of all Member States.  

At  the  Council  meeting  on  22  June  2012,  the  Member  States  that  had  expressed  their 
opposition to  a common system  of FTT already at earlier stages reiterated their position. In 
those  circumstances,  several  other  Member  States  voiced  their  intention  to  request  an 
authorisation  for  engaging  in  enhanced  cooperation  in  accordance  with  Article  20  TEU  and 
Article 329 TFEU. Some of the opponents to a common system of FTT (of any kind) stated 
that they would not oppose a procedure of enhanced cooperation on this issue in case all the 
necessary requirements were met.  

Having regard to the views expressed, the (Danish) Presidency concluded at the same meeting 
that support for an FTT as proposed by the Commission was not unanimous. The Presidency 
also  noted  that  there  was  support  by  a  significant  number  of  delegations  for  considering 
enhanced cooperation.  

On  its  part,  the  European  Council  stated  at  its  meeting  of  28  June  2012:  "[A]s  noted  at  the 
Council on 22 June 2012, the proposal for a Financial Transaction Tax will not be adopted 
by  the  Council  within  a  reasonable  period.  Several  Member  States  therefore  will  launch  a 
request  for  an  enhanced  cooperation  in  this  area,  with  a  view  to  its  adoption  by  December 
2012." 

At  the  Council  meeting  of  10  July  2012,  the  (then  Cypriot)  Presidency  referred  to  the 
discussions held at the Council meeting of 22 June 2012 and the above mentioned conclusions 
of  the  European  Council.  It  noted  the  lack  of  unanimous  support  for  the  FTT  proposal 
discussed  under  the  Danish  Presidency.  It  concluded  that  essential  differences  in  opinion 
persist  as  regards  the  need  to  establish  a  common  system  of  FTT  at  EU  level  and  that  the 
principle  of  harmonised  tax  on  financial  transactions  will  not  receive  unanimous  support 
within  the  Council  in  the  foreseeable  future.  It  finally  noted  that  there  is  support  by  a 
substantial  number  of  Member  States  for  considering  enhanced  cooperation,  which  would 
allow a limited number of Member States to first proceed among themselves. 

It follows from the above that the objectives of a common system of FTT, as proposed by the 
Commission and discussed in Council, cannot be attained within a reasonable period by the 
Union as a whole. Thus, the last resort for progress on this file within the Treaty framework 
would be a process of enhanced cooperation in accordance with Article 20 TEU and Article 
329 TFEU. 

In these circumstances, ten Member States (Belgium, Germany, Greece, Spain, France, Italy, 
Austria, Portugal, Slovenia and Slovakia) have addressed formal requests to the Commission 
indicating that they wish to establish enhanced cooperation between themselves in the area of 
the  establishment  of  a  common  system  of  FTT  and  that  the  Commission  should  submit  a 
proposal to the Council to that end. 

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4.3. 

Furthering  the  objectives  of  the  Union,  protecting  its  interests  and  reinforcing 
its integration process 

The establishment of an internal market is one of fundamental objectives of the Union as set 
out in Article 3(3) TEU. This objective would be furthered through a common system of FTT, 
since  capital  markets  are  now  characterised  by  an  important  international  dimension,  and 
significant  differences  in  taxation  in  this  field  would  entail  significant  distortions  of 
competition and would stand in the way of the establishment of a real internal market for the 
products covered. 

The harmonization of legislation concerning different forms of indirect taxation in accordance 
with Article 113 TFEU serves "the establishment and functioning of the internal market" and 
"to avoid distortion of competition". 

The coexistence of various national forms of FTT currently applicable or that are likely to be 
applied  in  the  foreseeable  future  in  a  number of  Member  States,  implies  a  fragmentation  of 
the  market.  This  in  turn  translates  in  distortions  of  competition  on  account  of  tax  arbitrage, 
deflections of trade, both between products and geographical areas, incentives for operators to 
avoid taxation through operations with little economic value as well as extra costs borne by 
them  due  to  the  complexities  inherent  in  such  situation.  This  scenario  emerges  already  at 
present and will further develop if no harmonisation is undertaken. It is contrary to the Union 
objective of a properly functioning internal market, quite apart from its negative effects on tax 
revenue.  

This is of particular relevance in the financial sector where the tax bases are highly mobile by 
nature  and  choices  depend  often  on  the  level  of transaction  costs  (which  include  taxes)  and 
where the risk of a cost-driven relocation is very high. 

The original Commission proposal based on Article 113 TFEU aimed at addressing the above 
issues. By its nature, such objective of establishing a true internal market and improving its 
functioning is equally pertinent within the scope of the enhanced cooperation requested, i.e. 
among a smaller number of Member States.  

At the beginning of the enhanced cooperation, the immediate benefits for the internal market 
would, by necessity, only accrue within the geographical reach of such cooperation, given that 
not  all  Member  States  participate.  However,  as  such  cooperation  must  "remain  open  at  any 
time to all Member States" (Article 20(1) second subparagraph TFEU, second sentence), its 
geographical reach will extend in a corresponding manner, if and when other Member States 
join it. 

Moreover, the advantages for the internal market, in terms of reducing costs due complexity, 
will  also  accrue  to  institutions  of  Member  States  not  participating  initially.  Their  financial 
transactions covered by enhanced cooperation will be subject to a single common system and 
not to a plethora of different national rules.  

In sum, the enhanced cooperation requested would further the objectives of the Union, protect 
its interests and reinforce the integration process. 

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4.4. 

Compliance with the Treaties and Union law 

In accordance with Article 326, paragraph 1, TFEU, enhanced cooperation must comply with 
the  Treaties  and  Union  law.  Thus,  establishing  a  common  harmonised  system  of  FTT, 
enhanced cooperation must respect the existing acquis in this area.  

At  present,  there  is  only  one  legal  act  of  the  Union  pertaining  to  taxation  of  financial 
transactions,  namely  Council  Directive  2008/7/EC8.  In  particular,  in  its  Article  5(2)  this 
Directive  excludes  any  form  of  indirect  tax  whatsoever  on  the  issuance  of  certain  securities 
(primary  market  transactions  in  these  securities).  On  the  other  hand,  notwithstanding  this 
exclusion, Article 6(1)(a) of this Directive provides EU Member States with the possibility to 
tax the transfer of securities (secondary market transactions). It follows that while a tax may 
be charged on transfers of securities, no tax may be charged on the issuance and acquisition 
by the first holder of financial instruments covered by Article 5(2) of Directive 2008/7/EC.9 

Any potential Council Directive implementing enhanced cooperation in the area of FTT will 
have  to  respect  the  provisions  of  Council  Directive  2008/7/EC,  so  as  to  avoid  any  potential 
conflict between the two Directives.  

4.5. 

No  undermining  of  the  internal  market  or  economic,  social  and  territorial 
cohesion; no barrier to or discrimination in trade; no distortion of competition 

4.5.1.  Enhanced cooperation must not undermine the internal market or economic, social 

and territorial cohesion 

Article 326, paragraph 2, TFEU requires that enhanced cooperation must not undermine the 
internal market or economic, social and territorial cohesion.  

The enhanced cooperation in the present context would not conflict with the requirement that 
such cooperation must not undermine the internal market. The harmonization of FTT in the 
territory  of  a  group  of  Member  States  (the  FTT  jurisdiction)  would  contribute  to  a  better 
functioning  of  the  internal  market,  although  those  advantages  will  not  accrue,  both 
immediately and fully, at the scale of all 27 Member States10. Risks of fragmentation of the 
internal market and of a distortion of competition will first of all be reduced and/or avoided 
within  the  scope  of  the  FTT  jurisdiction  covered  by  enhanced  cooperation.  Compared  to  a 
situation without such cooperation, the functioning of the internal market, at the level of the 
27 Member States, would be improved rather than undermined.  

Moreover,  financial  operators  also  from  outside  the  FTT  jurisdiction  will  benefit  from  the 
simplification  inherent  in  the  harmonised  regime  applicable  by  all  participating  Member 
States, as opposed to a scenario of diverging non harmonised FTT regimes. 

For similar reasons, economic, social and territorial cohesion would not be adversely affected 
by the enhanced cooperation sought. There are no indications that enhanced cooperation with 
a  view  to  the  adoption  of  harmonising  provisions  regarding  FTT  would  lead  to  appreciable 
differences  in  the  economic  or  social  development  between  participating  and  non-
participating  Member  States.  Nor  would  it,  in  particular,  in  any  way  negatively  affect  the 

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Council Directive 2008/7/EC concerning indirect taxes on the raising of capital, OJ L 46, 21.2.2008, p. 
11. 
See Judgment of the Court of Justice of 1 October 2009, Case C-569/07, points 32-35, citing case C-
415/02 (OJ C 282, 21.11.2009, p. 6). 
See Section 4.3 above. 

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economic  or  social  development  of  economically  poorer  or  geographically  more  remote 
regions of the European Union. In this regard,  it may also be noted that the Member States 
requesting  enhanced  cooperation  present  important  differences,  both  in  regard  to  their 
economic performance and to their geographic position within the Union.  

4.5.2.  Enhanced  cooperation  must  not  constitute  a  barrier  to  or  discrimination  in  trade 

between Member States nor distort competition between them 

Article 326, paragraph 2, TFEU also requires that enhanced cooperation must not constitute a 
barrier to or discrimination in trade between Member States, nor distort competition between 
them. 

The Commission considers that this requirement is fulfilled, for the following reasons.  

The terms of any harmonised FTT regime operated under enhanced cooperation would apply 
consistently  to  all  financial  institutions  and  transactions  concerned,  in  accordance  with 
objective criteria and, notably, the geographical connecting factors referred to. 

Moreover, the mere coexistence of the legal system of harmonised FTT, applicable within the 
participating Member States, on the one hand, and national legal systems of non-participating 
Member  States,  on  the  other,  cannot  as  such  be  considered  a  barrier,  discrimination  or 
distortion of competition. In the absence of enhanced cooperation, an even greater number of 
legal systems would coexist. From this perspective, rather, the enhanced cooperation sought 
diminishes the potential for distortions of competition, notably where it concerns distortions 
through non-taxation or double-taxation. 

4.6. 

Respecting  the  rights,  competences  and  obligations  of  non-participating 
Member States 

Article  327  TFEU  requires  that  any  enhanced  cooperation  respects  the  competences,  rights 
and obligations of those Member States that do not participate in it. 

Enhanced  cooperation  in  the  area  of  a  common  FTT  system  would  comply  with  this 
requirement as well. 

In  particular,  such  system  would  in  no  way  affect  the  possibility  for  non-participating 
Member  States  to  keep  or  introduce  an  FTT  on  the  basis  of  non-harmonised  national  rules, 
provided only they comply with Union law obligations that are anyway applicable. 

Moreover,  the  common  system  of  FTT  would  attribute  taxing  rights  to  the  participating 
Member States only on the basis of appropriate connecting factors. 

5. 

Overall conclusions 

On  the  basis  of  the  above,  the  Commission  concludes  that  all  legal  conditions  set  by  the 
Treaties for enhanced cooperation are fulfilled, provided that the act implementing the present 
enhanced cooperation fully respects the relevant provision of Council Directive 2008/7/EC. 

The  Commission  also  considers  that  it  is  appropriate  and  timely  to  authorise  enhanced 
cooperation. 

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The  recent  global  economic  and  financial  crisis  had  a  serious  impact  on  the  economies  and 
public  finances  in  the  EU.  The  financial  sector  has  played  a  major  role  in  causing  the 
economic crisis whilst governments and European citizens at large have born the costs. The 
financial sector has  experienced high profitability over the last two decades which could be 
partially the result of an (implicit or explicit) safety net provided by governments, combined 
with banking regulation and VAT exemption. 

Under  these  circumstances,  some  Member  States  started  to  implement  additional  forms  of 
financial sector taxation, whilst other Member States already had in place specific tax regimes 
for financial transactions. 

The current situation leads to the following undesirable effects: 

- a fragmentation of the tax treatment in the internal market for financial services - 
bearing in mind the increasing number of uncoordinated national tax measures being 
put in place- with the consequent possibilities of distortions of competition between 
financial  instruments,  actors  and  market  places  across  the  European  Union  and 
double taxation or double non-taxation; 

- the financial institutions do not make a fair and substantial contribution to covering 
the  cost  of  the  recent  crisis  and  a  level  playing  field  with  other  sectors  from  a 
taxation point of view is not ensured; 

- taxation policy does not contribute to provide disincentives for transactions which 
do  not  enhance  the  efficiency  of  financial  markets  nor  complement  regulatory 
measures  to  avoid  future  crises,  but  which  might  only  divert  rents  from  the  non-
financial  sector  of  the  economy  to  financial  institutions  and,  thus,  trigger  over-
investment in activities that are not welfare enhancing. 

The  implementation  of  a  common  system  of  financial  transaction  tax  amongst  a  sufficient 
number  of  Member  States  would  entail  immediate  tangible  advantages  on  all  three  points 
listed  above,  in  regard  to  financial  transactions  covered  by  enhanced  cooperation.  In 
connection  with  these  points,  the  position  of  the  participating  Member  States  in  terms  of 
relocation risks, tax revenues and efficiency of the financial market and avoidance of double 
taxation or non-taxation would be improved. Other Member States' legislation and policy in 
the area would not be affected, whereas operators from such other Member States may also 
benefit from the reduced fragmentation of the internal market (cf. above). Through a regime 
along the lines of the original Commission proposal it would be possible to address evasive 
actions, distortions and transfers to other jurisdictions. 

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2012/0298 (APP) 

Proposal for a 

COUNCIL DECISION 

authorising enhanced cooperation in the area of financial transaction tax 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 329(1) thereof, 

Having  regard  to  the  requests  made  by  Belgium,  Germany,  Greece,  Spain,  France,  Italy, 
Austria, Portugal, Slovenia and Slovakia, 

Having regard to the proposal from the European Commission, 

Having regard to the consent of the European Parliament11, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

In  accordance  with  Article  3(3)  of  the  Treaty  on  European  Union  (TEU),  the  Union 
shall establish an internal market. 

Pursuant  to  Article  113  of  the  Treaty  on  the  Functioning  of  the  European  Union 
(TFEU)  the  Council  shall  adopt  provisions  for  the  harmonisation  of  legislation 
concerning  turnover  taxes,  excise  duties  and  other  forms  of  indirect  taxation  to  the 
extent  that  such  harmonisation  is  necessary  to  ensure  the  establishment  and  the 
functioning of the internal market and to avoid distortion of competition. 

In  2011,  the  Commission  took  note  of  a  debate  on-going  at  all  levels  on  additional 
taxation  of  the  financial  sector.  This  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  disincentivise 
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. 

Against this background, the Commission adopted a proposal for a Council Directive 
on a common system of financial transaction tax and amending Directive 2008/7/EC.12 
The  main  objective  of  that  proposal  was  to  ensure  the  proper  functioning  of  the 
internal market and to avoid distortion of competition. 

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OJ C , , p. . 
COM (2011) 594 final of 28 September 2011. 

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(5) 

(6) 

(7) 

(8) 

(9) 

At  the  Council  meeting  of  22  June  2012,  it  was  ascertained  that  there  was  no 
unanimous  support  for  a  common  system  of  financial  transaction  tax  (FTT)  as 
proposed by the Commission. The European Council concluded on 29 June 2012 that 
the  proposed  Directive  would  not  be  adopted  by  the  Council  within  a  reasonable 
period. At the Council meeting of 10 July 2012, reference was made to persisting and 
essential differences in opinion as regards the need to establish a common system of 
FTT at the Union level and it was confirmed that the principle of harmonised taxation 
on financial transactions will not receive unanimous support within the Council in the 
foreseeable future.  

In these circumstances, 10 Member States, namely Belgium, Germany, Greece, Spain, 
France,  Italy,  Austria,  Portugal,  Slovenia  and  Slovakia,  addressed  requests  to  the 
Commission  by  letters  received  between  28  September  and  22  October  2012 
indicating that they wished to establish enhanced cooperation between themselves in 
the area of FTT. These Member States requested that the scope and objectives of the 
enhanced  cooperation  be  based  on  the  proposal  for  a  Directive  submitted  by  the 
Commission on 28 September 2011. Reference was also made in particular to the need 
to avoid evasive actions, distortions and transfers to other jurisdictions. 

The  enhanced  cooperation  should  provide  the  necessary  legal  framework  for  the 
establishment  of  a  common  system  of  FTT  in  the  participating  Member  States  and 
ensure  that  the  basic  features  of  the  tax  are  harmonised.  To  the  extent  possible, 
incentives  for  tax  arbitrage  and  allocation  distortions  between  financial  markets,  as 
well  as  possibilities  for  double  or  non  taxation,  as  well  as  evasive  actions,  should 
thereby be avoided. 

The  conditions  laid  down  in  Article  20  TEU  and  Articles  326  and  329  TFEU  are 
fulfilled. 

It  was  recorded  at  the  Council  meeting  on  29  June  2012  and  confirmed  on  10  July 
2012 that the objective to adopt a common system of financial transaction tax cannot 
be  attained  within  a  reasonable  period  by  the  Union  as  a  whole.  Consequently,  the 
requirement set out in Article 20(2) TEU that enhanced cooperation may be adopted 
only as a last resort is fulfilled. 

(10)  The  substantive  area  within  which  enhanced  cooperation  would  take  place,  the 
establishment  of  a  common  system  of  FTT  within  the  Union,  is  an  area  covered  by 
Article 113 TFEU and therefore by the Treaties.  

(11)  Enhanced  cooperation  in  the  area  of  the  establishment  of  a  common  system  of  FTT 
aims  at  ensuring  the  proper  functioning  of  the  internal  market.  At  the  scale  of  this 
cooperation, it avoids the coexistence of differing national regimes and thus an undue 
fragmentation  of  the  market,  as  well  as  ensuing  problems  in  form  of  distortions  of 
competition,  deflections  of  trade,  both  between  products,  between  actors  and 
geographical  areas  and  incentives  for  operators  to  avoid  taxation  through  operations 
with  little  economic  value.  Such  issues  are  of  particular  relevance  in  the  area 
concerned,  which  is  marked  by  highly  mobile  tax  bases.  Thus,  it  furthers  the 
objectives of the Union, protects its interests and reinforces its integration process in 
accordance with Article 20(1) TEU. 

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(12)  The establishment of a common harmonised system of FTT is not included in the list 
of areas of exclusive competence of the Union set out in Article 3(1) TFEU. Since it 
serves the functioning of the internal market, in accordance with Article 113 TFEU, it 
falls  under  the  shared  competences  of  the  Union  within  the  meaning  of  Article  4 
TFEU and thus within the Union's non-exclusive competence. 

(13)  Enhanced  cooperation  in  the  area  concerned  complies  with  the  Treaties  and  Union 
law,  in  accordance  with  Article  326(1)  TFEU.  In  line  with  Article  326(2)  TFUE,  it 
will not undermine the internal market or economic, social and territorial cohesion, nor 
constitute  a  barrier  to  or  discrimination  in  trade  between  Member  States  or  distort 
competition between them. 

(14)  Enhanced  cooperation  in  the  area  concerned  respects  the  competences,  rights  and 
obligations of non-participating Member States, in accordance with Article 327 TFEU. 
Such  system  would  not  affect  the  possibility  for  non-participating  Member  States  to 
keep or introduce an FTT on the basis of non-harmonised national rules. The common 
system  of  FTT  would  attribute  taxing  rights  to  the  participating  Member  States  only 
on the basis of appropriate connecting factors. 

(15)  Subject to compliance with any conditions of participation laid down in this Decision, 
enhanced cooperation in the area referred to therein is open at any time to all Member 
States  willing  to  comply  with  the  acts  already  adopted  within  this  framework  in 
accordance with Article 328 TFEU, 

HAS ADOPTED THIS DECISION:  

Article 1 

Belgium, Germany, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia are 
hereby  authorised  to  establish  enhanced  cooperation  between  themselves  in  the  area  of  the 
establishment  of  a  common  system  of  financial  transaction  tax,  by  applying  the  relevant 
provisions of the Treaties. 

Article 2 

This Decision shall enter into force on the day of its adoption. 

Done at Brussels, 

For the Council 
The President 

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