1 Enhanced cooperation and financial
transaction tax
| (a)
(34372)
15390/12
COM(12) 631
(b)
(34692)
6442/13
+ ADDs 1-2
COM(13) 71
|
Draft Council Decision authorising enhanced cooperation in the area of financial transaction tax
Draft Council Directive implementing enhanced cooperation in the area of financial transaction tax
|
| Legal base | (a) Article 329(1) TFEU; consent; QMV
(b) Article 113 TFEU; consultation; unanimity (amongst the Member States participating in enhanced cooperation)
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| Department | HM Treasury
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| Basis of consideration | Minister's letter of 24 May 2013
|
| Previous Committee Reports | (a) HC 86-xxii (2012-13), chapter 13 (5 December 2012), HC 86-xxvi (2012-13), chapter 5 (9 January 2013), HC 86-xxxiv (2012-13), chapter 1 (6 March 2013), HC 86-xxxvii (2012-13), chapter 2 (26 March 2013) and HC 86-xxxix (2012-13), chapter 2 (24 April 2013)
(b) HC 86-xxxvii (2012-13), chapter 2 (26 March 2013) and HC 86-xxxix (2012-13), chapter 2 (24 April 2013)
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| Discussion in Council | (a) 22 January 2013
(b) Not known
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| Committee's assessment | Legally and politically important
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| Committee's decision | For debate on the Floor of the House (decision reported 26 March 2013)
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Background
1.1 In September 2011 the Commission proposed a draft Directive
to establish an EU financial transaction tax (FTT).[1]
This was dependent on the unanimous agreement of the Council
and it became obvious that such support would not be forthcoming.
1.2 Under Article 20 TEU and in accordance with
Articles 326-334 TFEU, nine or more Member States may seek Council
authorisation to establish enhanced cooperation amongst themselves
by exercising non-exclusive competences of the EU. The Council's
authorising Decision is adopted by QMV.
1.3 With this draft Council Decision, document
(a), the Commission proposed the Council's authorisation of an
enhanced cooperation procedure for the introduction of an FTT.
The Member States concerned were Austria, Belgium, Estonia, France,
Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain.
The draft Decision was adopted by the Council on 22 January.
The draft Directive to introduce an enhanced cooperation FTT,
document (b), is based upon the Commission's original proposal
for an EU wide FTT.
1.4 We have recommended that the two documents
be debated on the Floor of the House. We suggested that in the
debate Members might like particularly to explore five points
and asked, to facilitate that examination, to have as soon as
possible the Government's answers to those points. Whilst awaiting
the Government's answers we were told that on 18 April the Government
applied to the Court of Justice to annul the Council Decision
allowing enhanced cooperation for an FTT, which we supported as
a sensible precautionary measure.[2]
The Minister's letter
1.5 The Financial Secretary to the Treasury (Greg
Clark) writes now with the Government's responses to our five
points. He says first, on our question as to whether, given the
Commission's stated objectives, Article 113 TFEU is the correct
legal basis for an enhanced cooperation FTT, that:
- the legal base will need to
be considered once the final content of the proposal is determined;
and
- to date, however, the Government has not identified
any issues which would call into question the use of that legal
base.
1.6 As for the Government's subsidiarity concerns,
the Minister says that:
- as the Government has stated
from the outset, it does not believe a broad-based FTT like that
proposed by the Commission is viable at either national or EU
level; and
- rather it would need to be agreed globally.
1.7 He comments that:
- the objectives are, therefore,
not best achieved at EU level, or by a group of EU Member States
acting together through enhanced cooperation;
- more narrowly applied transaction taxes can be
successfully implemented at national level, as demonstrated by
the UK stamp duty and the taxe sur les transactions financires
introduced in France last year, both of which are based on an
issuance principle; and
- the Government does not wish, however, to stand
in the way of those who wish to introduce a FTT through enhanced
cooperation, as long as it does not infringe the UK's rights under
the Treaties.
1.8 On progress made in securing a full impact
assessment of what the proposal means for non-participating Member
States the Minister tells us that:
- the Government shares our concern
that the Commission has not provided satisfactory analysis of
the economic impacts on individual Member States, either those
that are participating or not participating;
- the Government, along with other Member States
(both participating and non-participating) have continued to express
the concern that the Commission has not provided such details;
- while the Government firmly believes the Commission
should have made greater efforts to analyse these impacts before
bringing forward the proposal, he does not anticipate it will
be possible to estimate, quantitatively and with certainty, a
net figure for the economic impact of the FTT on the UK —
the data available is insufficient, the assumptions required are
too great and the adaptive behaviour of markets too unpredictable;
- while mindful of these constraints, the Government
has, however, continued to engage with a wide cross section of
market users including corporate issuers, asset managers, banks
and trade bodies to improve its understanding of the potential
impact of the tax on the UK;
- its general view is that while the tax could
place the UK's financial services sector in a better competitive
position relative to those businesses in participating countries,
it would also carry an array of significant negative impacts;
- it would increase funding costs for issuers,
including UK issuers whose securities are traded by FTT zone counterparties,
it would be highly disruptive to the "plumbing" of EU
financial markets including repo markets and money markets, it
risks undermining elements of the G20 regulatory agenda and it
implies major challenges for implementation, monitoring and collection
which are bound to affect the UK; and
- in short, any benefits that may accrue to the
UK from the tax as currently proposed (from relocation of activity,
for example) need to be factored against these considerable risks
— for this reason the Government cannot support the FTT
in the form proposed by the Commission.
1.9 The Minister adds that there are now a number
of recently published analyses focusing on specific impacts of
the tax, which he would be happy to forward to us.
1.10 The Minister then turns to our two final
questions — what developments there have been in the Government's
thinking in relation to the other key issues mentioned previously
by the Minister, that is compliance with EU law and the single
market, extra-territoriality, double taxation and enforceability,
and whether, if not wholly satisfied as to the acceptability of
an enhanced cooperation FTT as agreed by the Member States concerned,
the Government would take action before the Court of Justice.
Recalling that the Government has made a legal application to
the Court of Justice challenging the Council's decision authorising
use of the enhanced cooperation procedure for a FTT, the Minister
says that its application focuses on three key elements, further
details of which he provides in an attached paper, which we annex.
Conclusion
1.11 We are grateful to the Minister for these
responses and now look forward to the debate we have already recommended,
which we hope will take place soon.
1.12 As for the analyses focusing on specific
impacts of the tax the Minister mentions, we suggest that he arranges
for copies to be placed in the Library for the use of Members
participating in the debate.
1 (33179) 14942/11 + ADDs 1-20: See HC 428-xxxix (2010-12),
chapter 4 (26 October 2011), HC 428-xli (2010-12), chapter 10
(9 November 2011) and HC 86-xxxvii (2012-13), chapter 2 (26 March
2013). Back
2
See headnote. Back
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