European Union announces FTT proposals: PwC comments
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The European Union has today announced proposals to introduce a Financial Transaction Tax (FTT). The FTT is expected to raise €31bn in tax revenue for the EU and the operational changes required in order to comply with the requirements of the regime will result in significant costs for financial institutions and their clients.
The scope of transactions covered by the FTT in the new proposal continues to be very broad and includes most transactions in financial instruments, whether conducted on a regulated market or on an over-the-counter basis.
David Newton, global financial services tax leader at PwC said:
“These proposals are significant, not least because the tax alone is expected to raise €31bn of tax revenues for the European Union. This makes the tax politically attractive, but the cost of implementation for the industry will be significant.
“For large financial services organisations with a European footprint, implementation costs of €12-14m are likely, based on the experience of individual country FTTs already implemented.
“There is clearly going to be a lot of discussion about the final basis of taxation – and within the FS industry, institutions should be evaluating the impact on their businesses so that they can identify their key areas of concern and develop a strategy. With negotiations on the draft Directive set to start imminently, now is the time for the FS industry to get its point across.
“What’s uncertain at this time is which countries will be taking part in the final FTT and we should expect to see lots of debate on the precise form of the taxes over the months to come, including critical exemptions.
“In addition, we shouldn’t underestimate the geographical reach of the proposed EU FTT. This tax will affect financial and non-financial institutions outside of the EU and not just those in the 11 countries who have already signed up for the Enhanced Cooperation Procedure.”
Today’s draft is largely based on the original proposal released by the European Commission in September 2011 but it does contain some important changes. Importantly, the tax is not restricted to participating member states, and non-EU financial institutions with no presence in the FTT zone could now be liable to the tax when involved in a transaction over instruments issued by a company within the FTT zone.
The draft Directive still proposes a start date for the FTT regime of 1 January 2014.
The scope of transactions covered by the FTT in the new proposal continues to be very broad and includes most transactions in financial instruments, whether conducted on a regulated market or on an over-the-counter basis.
David Newton, global financial services tax leader at PwC said:
“These proposals are significant, not least because the tax alone is expected to raise €31bn of tax revenues for the European Union. This makes the tax politically attractive, but the cost of implementation for the industry will be significant.
“For large financial services organisations with a European footprint, implementation costs of €12-14m are likely, based on the experience of individual country FTTs already implemented.
“There is clearly going to be a lot of discussion about the final basis of taxation – and within the FS industry, institutions should be evaluating the impact on their businesses so that they can identify their key areas of concern and develop a strategy. With negotiations on the draft Directive set to start imminently, now is the time for the FS industry to get its point across.
“What’s uncertain at this time is which countries will be taking part in the final FTT and we should expect to see lots of debate on the precise form of the taxes over the months to come, including critical exemptions.
“In addition, we shouldn’t underestimate the geographical reach of the proposed EU FTT. This tax will affect financial and non-financial institutions outside of the EU and not just those in the 11 countries who have already signed up for the Enhanced Cooperation Procedure.”
Today’s draft is largely based on the original proposal released by the European Commission in September 2011 but it does contain some important changes. Importantly, the tax is not restricted to participating member states, and non-EU financial institutions with no presence in the FTT zone could now be liable to the tax when involved in a transaction over instruments issued by a company within the FTT zone.
The draft Directive still proposes a start date for the FTT regime of 1 January 2014.
Comments
no final and clear opinion - yes or no, bad or make sense.
Posted by: Bob | 15 February 2013 at 15:28