COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a COUNCIL DIRECTIVE implementing enhanced cooperation in the area of financial transaction tax
Date: 2013-02-14
Institutions: European Commission
Subjects: Austria, Belgium, Estonia, European tax cooperation, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia, Spain, enhanced cooperation, financial transaction, indirect tax, tax harmonisation

EUROPEAN 
COMMISSION 

Brussels, 14.2.2013  
SWD(2013) 29 final 

COMMISSION STAFF WORKING DOCUMENT 

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying the document 

Proposal for a COUNCIL DIRECTIVE 

implementing enhanced cooperation in the area of financial transaction tax 

{COM(2013) 71 final} 
{SWD(2013) 28 final} 

EN 

   EN 

 
 
 
 
  
 
INTRODUCTION  

1. 
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.  

During the seven meetings of the Council's "Working Party on Tax Questions – Indirect Tax 
(FTT)" (hereafter "Council Working Party"), 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  clear  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.  

In these circumstances, eleven Member States (Austria, Belgium, Estonia, France, Germany, 
Greece,  Italy,  Portugal,  Slovakia,  Slovenia,  Spain)  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. 

On  23  October  2012,  the  Commission  presented  its  findings  on  these  requests.  It  could  not 
find a single incidence of non-compliance of these requests with Treaty provisions and, after 
assessing  the  political  opportunity  of  progress  on  this  file,  proposed  a  Council  Decision 
authorising  enhanced  cooperation  in  the  area  of  financial  transaction  tax.  Following  the 
consent  of  the  European  Parliament  on  12  December  2012,  the  Council  authorised  the 
enhanced co-operation procedure on 22 January 2013. 

2. 

PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES 

As  required  by  the  Impact  Assessment  Guidelines,  this  analysis  has  benefited  from  the 
consultation  of  all  interested  parties.  This  analysis  of  policy  options  and  impacts  of 
implementing enhanced cooperation in the area of financial transaction tax actually benefited 
and builds on the Impact Assessment having accompanied the initial Commission proposal3 
for  which  an  extensive  consultation  has  been  conducted,  the  annexes  to  that  Impact 

1 
2 

3 

COM(2011) 594 of 28 September 2011. 
Council Directive 2008/7/EC of 12 February 2008 concerning indirect taxes on the raising of capital, 
OJ L 46, 21.2.2008, p. 11–22. 
SEC(2011)1102 final. 

2 

 
 
                                                            
assessment  as  well  as  additional  analysis  undertaken  and  published  by  the  European 
Commission4. 

3. 

PROBLEM DEFINITION 

The financial sector and other sectors are currently subject to some non-harmonised national 
taxes on financial transactions that raise issues of non-taxation and double taxation both in the 
EU11+ and in the non-participating Member States and,  thus, a fragmentation  of the  Single 
Market  for  financial  services.  One  of  the  main  aims  of  recent    initiatives  for  taxing  the 
financial  sector  had  been  and  still  is  to  receive  a  fair  and  substantial  contribution  from  the 
financial  sector  to  the  financing  of  the  rescue  operations  from  which  it  benefited  either 
directly  or  indirectly.  The  economic  development  since  the  outbreak  of  the  economic  and 
financial  crisis  and  the  relative  successful  stabilisation  of  financial  markets  do  not  imply  a 
change  of  the  characteristics  of  the  problems  to  be  tackled,  namely  huge  cost  to  rescue  the 
financial sector pre-financed by the tax payer, the ever more pressing need for bringing public 
finances back on a sustainable path and the absence of a fair and substantial contribution from 
the financial sector. 

4. 

OBJECTIVES 

The following general objectives can be defined: 

• 

• 

• 

Harmonising existing legislation; 

Limiting undesirable market behaviour and thereby stabilizing markets; 

Ensuring that financial institutions make a fair and substantial contribution to 
covering the costs of the recent crisis. 

5. 

POLICY OPTIONS 

The baseline scenario against which alternative policy options are to be benchmarked should 
be a situation where no agreement on a common system of FTT can be found, neither at the 
level of EU27 nor at the level of EU11+.  

This baseline scenario is characterised by a variety of un-coordinated national regimes under 
constant  change  (as  some  Member  States  decided  to  change  their  systems  or  introduce  new 
forms of FTT)5, characterised in general by: 

• 

The scope of the tax in most countries is rather narrow and generally covers the 
trading in securities (especially shares) on regulated markets only, with little or 
no taxation of derivatives or over-the-counter transactions; 

4 

5 

the 

e.g. 

website 

FTT-dedicated 

Commission 
See 
http://ec.europa.eu/taxation_customs/taxation/other_taxes/financial_sector/index_en.htm 
or 
ECFIN(2012)  –  Securities  Transaction  Taxes:  Macroeconomic  Implications  in  a  General-Equilibrium 
Model 
at 
by  Rafal  Raciborski, 
http://ec.europa.eu/economy_finance/publications/economic_paper/2012/ecp450_en.htm. 
In the enhanced cooperation zone, three Member States have different forms of FTT in place, while at 
least three others – at the time this analysis document was drafted – were planning to introduce their 
own national schemes in the near future. 

Julia  Lendvai,  Lukas  Vogel) 

(economic 

European 

paper 

the 

of 

3 

 
 
                                                            
• 

• 

• 

Significant substitution of financial instruments, in order to avoid taxation; 

Specific exemptions of instruments and actors (e.g. for derivatives, shares/units 
of UCITS, market makers, broker-dealers etc.); 

The collection of the tax is usually done through intermediaries/brokers and the 
tax is typically not levied on both ends of the financial transaction. 

In  consequence,  these  taxes  generate  rather  little  revenue,  do  not  invite  for  voluntary 
compliance,  and  the  tax  systems  in  place  violate  a  basic  principle  of  taxation that  primarily 
aims  at  revenue-raising,  i.e.  to  treat  similar  events  (actors,  instruments,  market  places)  in  a 
similar way. This, in turn, triggers a distortion in competition both within individual Member 
States and within the Single Market. 

So as to overcome these shortcomings of the baseline, different alternatives for action could 
have been envisaged: 

• 

• 

• 

• 

Option A: an FTT at the global level; 

Option B: an FTT at the level of EU27; 

Option C: an FTT at the level of EU11+ through enhanced cooperation; 

Option D: an FTT co-ordinated outside the framework of the EU treaties. 

Options  A  and  B  are  to  be  discarded  for  the  foreseeable  future  because  of  lack  of  political 
feasibility. 

6. 

COMPARING POLICY OPTIONS 

The  impact  assessment  having  accompanied  the  initial  proposal  of  September  2011  has 
clearly shown that in the absence of coordinated EU action, none of the objectives of taxing 
the financial sector would be met. In other words, solely relying on un-coordinated national 
action would lead to a plethora of different national systems to tax the financial sector, thus, 
undermining the proper functioning of the Single Market, triggering numerous incidences of 
double taxation and – more importantly – of double non-taxation despite the overarching aim 
of ensuring that the financial sector makes a fair and substantial contribution to financing the 
costs  of  the  crisis.  No  tax  neutrality  amongst  different  products,  market  places  and  actors 
would materialise, and it would be easy for actors to design their transactions, especially the 
more mobile ones, so that no tax would be due. In consequence, the potential revenue stream 
would  be  rather  small  and  tiny  (potentially  except  for  countries  hosting  important  financial 
centres), and taxation would hardly contribute to strengthen the effectiveness of regulation to 
discourage  activities  that  do  not  improve  the  functioning  and  stability  of  financial  markets 
while at the same time inviting for myopic behaviour and rent seeking. 

Against  this  benchmark  and  in  the  absence  of  a  global  solution,  a  common  system  of  a 
Financial  Transaction  Tax  (FTT)  for  EU27  as  proposed  by  the  Commission  in  September 
2011 (option B) would perform very positively in all dimensions. It would have been able to 
avoid any kind of double taxation or double non-taxation within EU27, to design the tax in a 
way  that  it  is  neutral  across  all  actors,  all  markets  and  all  instruments.  Thanks  to  its  broad 
base and powerful anti-relocation, anti-evasion and anti-avoidance features a EU27 common 
system would have allowed to make sure that the financial sector makes a fair and substantial 

4 

 
 
contribution to financing the costs of the crisis, while at the same time discouraging some of 
the activities that do not improve the functioning or stability of financial markets. 

However, the option of establishing a common system of FTT for EU27 was not possible for 
political  reasons  and  will  not  be  possible  to  be  achieved  in  the  foreseeable  future.  Thus,  11 
Member States representing about two thirds of the entire EU27 economy, have requested to 
be allowed to go ahead  under enhanced cooperation (option C) and based on the  objectives 
and scope of the initial Commission proposal. While not being as effective as the same policy 
implemented  at  the  level  of  EU27  (it  will  not  be  possible  to  avoid  all  incidents  of  double 
taxation within the entire EU27 for as long as not all Member States will have joined the FTT 
jurisdiction,  and  also  the  anti-relocation  /  anti-evasion  provisions,  albeit  still  being  very 
powerful,  will  be  a  little  bit  less  effective  than  the  same  FTT  under  an  EU27  regime)  a 
common  system  of  FTT  at  the  level  of  EU11+  will  constitute  a  major  improvement  as 
compared to the baseline scenario. 

Under the Danish Presidency, several sub-options of the FTT had also been discussed in the 
six meetings of the Council Working Party. At that time these discussions took place under 
the assumption that the common system of FTT would be applied at the level of EU27 and 
not  at  a  subset  of  Member  States.  However,  the  same  discussions  might  pop  up  in  the 
discussions at the subset of Member States as well. The different variants discussed could be 
clustered in the following four sub-options: 

•  permanently exempting from the scope of the directive certain financial instruments, such 
as the issue and redemption of shares in UCITS or AIF, the trading of government bonds 
and  bills,  or  the  conclusion  and  modification  of  repo  and  derivative  agreements  (sub-
option C.1); 

•  permanently  exempting  from  the  scope  of  the  directive  certain  actors,  such  as  the 
managers of public debt, regional development banks, the activities of pillar II and pillar 
III  pension  funds,  so-called  "internalisers"  such  as  market  makers,  broker-dealers  and 
proprietary traders (sub-option C.2); 

•  strengthening  the  anti-relocation  features  of  the  common  system  by  complementing  the 
residence principle with elements of the issuance principle and changing the regional tax 
incidence by altering the order of criteria also determining the assignment of the power to 
tax of the different Member States (sub-option C.3), and 

• 

introducing the common system only gradually, i.e. temporarily exempting certain actors, 
markets and products and broadening the tax base only successively (sub-option C.4). So, 
it might take several years until the scope and objectives as proposed by the Commission 
in its initial proposal will have been implemented. 

The analysis of the impacts of different policy options has found that both, option C and the 
four  sub-options  analysed  would  still  feature  better  than  the  baseline  scenario  of  doing 
nothing on all dimensions (as indicated by the “+” symbols in the below table), except for the 
criterion  "anti-evasion",  as  in  such  a  case  non-taxation  of  the  most  mobile  tax  bases  might 
turn out to be the dominant pattern of national tax regimes. However, only the sub-option C.3 
would  feature  as  well  or  even  better  (with  respect  to  its  revenue-raising  and  anti-relocation 
characteristics) than the initial Commission proposal adjusted for EU11+ (option C). 

However, the analysis also invites for the conclusion that some of the more tailored measures 
in  the  sub-options  C.1  to  C.3  should  be  considered  for  adoption,  while  sub-option  C.4 

5 

 
 
(phasing in of a fully-fledged FTT) would come with significant shortcomings as compared to 
the establishment in one go of a common system of FTT covering all products, all actors and 
all markets. 

Thus, given the impossibility of establishing a common system of FTT at the level of EU27, 
and  in  the  light  of  this  analysis  of  policy  options  and  impacts,  the  most  promising  policy 
might  be  to  introduce  the  common  system  as  proposed  by  the  European  Commission  in 
September 2011, but at the subgroup of 11 Member States under enhanced cooperation, while 
adjusting and complementing it with the following elements of sub-options C.1, C.2 and C.3: 
•  exclude the issue of units and shares of UCITS and AIF from the scope of the directive so 

as not to run the risk of taxing the raising of capital; 

•  exclude the managers of public debt from the scope of the directive so as not to interfere 

with their activity of smoothing the market; 

•  add elements of the issuance principle, and complement the "authorisation" criterion so as 
to  close  a  potential  loophole  under  enhanced  cooperation,  thus,  strengthen  the  anti-
relocation features of the proposal. 

It could be left to the outcome of negotiations amongst participating Member States to what 
extent they want to alter the order of criteria determining the Member State of establishment 
as well as the regional tax incidence, especially when they agreed on what all of them could 
consider as being a fair revenue-sharing system. 

Table 1: Comparing the different policy options* 

Single 
Market 

Tax 
neutrality

Anti-
relocation/ 

evasion 

Potential 
additional 
revenue 

Discouraging 
excessive risk 
taking, rent 
seeking, myopic 
behaviour 

Baseline (no action) 

Option C 
(FTT at EU11) 

Sub-option C.1 
(EU11, but permanently 
exempting instruments) 

UCITS/AIF 

Public debt 

Repos 

Derivatives 

Sub-option C.2 
(EU11, but permanently 
exempting actors) 

Managers of public debt 

Development banks 

"Internalisers" 

0 

++ 

++ 

++ 

++ 

++ 

0 

+++ 

++ 

++ 

++ 

0 

++ 

+ 

+++ 

++ 

6 

0 

++ 

+ 

++ 

+ 

0 

++ 

+ 

0 

+++ 

++ 

++ 

+++ 

+ 

+++ 

+++ 

0 

++ 

++ 

++ 

++ 

0 

++ 

++ 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pension funds 

+ 

+ 

+ 

++ 

+ 

+ 

+ 

++ 

0 

+ 

Sub-option C.3  
(EU11, but modifying 
criteria in Art.4) 

Add elements of the 
issuance principle 

Change the order or 
criteria 

Re-establish the power 
of the "authorisation" 
criterion 

Sub-option C.4 
(EU11, but step by step 
/temporary exemptions) 

++ 

+++ 

++ 

+++ 

+++ 

./. 

./. 

./. 

./. 

./. 

++ 

+++ 

++ 

+++ 

+++ 

++ 

+ 

+ 

0 to +++ 

0+ 

* The effects are for within EU11+, as compared to the baseline scenario of non-action. 

7. 

IMPLEMENTATION, MONITORING AND EVALUATION 

The evaluation of the macroeconomic and microeconomic consequences of the application of 
the legislative measure could take place three years after the entry into force of the legislative 
measures  implementing  the  Directive.  The  Commission  could  then  submit  to  the  Council  a 
report on the technical functioning of the Directive.  

7