FTT – Financial Transaction Tax (EU Proposal)

The Financial Transaction Tax (FTT) is a European Commission proposal for an EU-wide tax on trading in financial instruments. The proposal provides for rates of 0.1% on equities and bonds and 0.01% on derivatives. After the failure of an EU-wide solution, ten member states (originally eleven, before Estonia's withdrawal) have requested enhanced cooperation.

• Tax rates: 0.1% on equities/bonds, 0.01% on derivatives
• Residence principle: Residency of one participating party suffices for tax liability
• Issuance principle: Securities issued in participating states are always taxable
• Status: Politically blocked — agreement among the 10 enhanced cooperation states still pending

The idea of a global financial transaction tax goes back to economist James Tobin (1972), who proposed a tax on foreign exchange transactions to curb speculative capital flows (the so-called 'Tobin Tax').

The European Commission first tabled an EU FTT proposal in 2011 (COM(2011) 594). Failing unanimity, 11 countries (later 10, after Estonia's withdrawal) requested enhanced cooperation under Art. 20 TEU, which was authorised by the Council on 22 January 2013 (Decision 2013/52/EU). On 14 February 2013, the Commission presented a revised proposal (COM(2013) 71). Since then, the participating countries (Germany, France, Italy, Spain, etc.) have been unable to agree on a common basis.

Germany and France have repeatedly discussed bilateral mini-FTT models. France has had its own FTT since 2012 (originally 0.2% on equities of large domestic companies, raised to 0.3% in 2017). Germany's 2020 initiative under Finance Minister Scholz — a stripped-down model covering only equities, not derivatives — failed due to coalition-internal resistance.

The original Commission proposal covers:

• Equities and bonds: Purchases and sales on secondary markets
• Derivatives: Futures, options, swaps, forward contracts
• Geographically: Transactions where at least one party is resident in an FTT state or the instrument was issued there

Excluded: Primary market issuances (new issue), central bank operations, member state government bonds, day-to-day currency transactions of citizens (credit cards, transfers), and market-making activities under certain conditions.

• Tax collection: Financial institutions collect and remit FTT on behalf of both transaction parties
• Sole liability for non-EU counterparties: Where the counterparty is non-EU, the EU-resident institution bears sole liability
• Residence principle: Tax liability where one party is resident in an FTT member state
• Issuance principle: Tax liability regardless of trading venue where instrument is issued in an FTT state
• Record-keeping: Full transaction documentation for audit purposes

2 corrections:
- French FTT rate was 0.
- 'blocked since 2013' is inaccurate — proposal relaunched in 2013, stalled from ~2016.
1 update:
- Last key_date December 2019.
6 clarifications.
2 notes.