Philip Aldrick, The Telegraph
Details on how the tax will change are still fuzzy, as national leaders are still negotiating with the European Commission. But it does seem likely the tax won’t take full effect on January 1, 2014 as originally planned, and it appears derivatives—and potentially sovereign debt—won’t be taxed, and the tax rates will fall. What’s left, it seems, will be a 0.01% stamp duty on equity trades.
What’s not clear, however, is how officials will address the most problematic piece of the tax: its extraterritorial reach. In their attempts to prevent tax avoidance, commissioners decided to apply the tax to every security issued in 1 of the 11 nations adopting the FTT. So, for example, if someone in the UK or US bought or sold shares of a German firm, they’d have to pay. If the EU’s airline carbon tax is any guide, this is unenforceable—governments could just make it illegal for their citizens to comply, just as China did with the airlines tax, which is one big reason it was abandoned late last year. US and UK officials have questioned the FTT’s legality, and the UK even filed suit at the European Court of Justice.
Ideally, officials would just agree to kill the FTT entirely—many have admitted it will likely hurt Europe’s economy, financial sector and public finances, and they don’t expect it to raise much revenue (initial forecasts of €35 billion were recently slashed to €3.5 billion). If they do keep part of it, however, the small stamp duty on shares is probably the least harmful—the UK has had a share stamp duty for a while, without much ill effect. However, I believe they’ll be better off if they drop the extraterritorial provisions—if they don’t, firms have incentive to move away from those 11 countries, which could hollow out their private sectors over time. That’s the opposite of what nations like France, Spain, Portugal, Greece and Slovenia need—these countries need to get more competitive, not less.