However, following that opinion of the EU Council of Ministers' legal service, the European Commission has hit back with its own legal opinion. We have got our hands on the full text, which can be seen here (thanks to Italian magazine Valori for posting it on its website).
Despite this, we stick with our statement. For all intents and purposes, the extensive FTT that was initially proposed by the Commission seems to be dead as a policy. Indeed, it remains part of a rather heated technical discussion within the EU institutions - but we have already noted the likelihood of it returning in a much watered down version to save face of those invested in the idea.
It is, therefore, a living dead policy – a 'zombie tax' if you will.
The Commission’s counter arguments are very specific to those put forward by the Council’s legal service – itself setting up an interesting head on clash between the two bodies – the main points of which are:
- The Council does not present any legal basis for its argument that the FTT breaches international law. The Commission stresses that the issue of “more relevant” right to impose taxes is not legally defined.
- The Commission essentially argues that its FTT proposal does present enough of a nexus between the state and the transactions to allow for taxation – specifically that the counterparty principle fits with international law.
- That the FTT does fit with the enhanced cooperation procedure since it does not stop non–participating member states from pursuing their own financial taxes.
- “What the Council LS perceives as discrimination is in reality nothing but a disparity between different national tax regimes.”
As we highlighted along with our exclusive release of internal documents earlier this year, one of the key reasons behind the loss of enthusiasm for the FTT was the economic impact. It became clear it is not practically workable in many cases, particularly due to its impact on repo markets as well as government and corporate bond markets.
We also still strongly agree with the Council’s take. While in legal terms the impact on non-participating states can be fiddled, in real terms there will be a sizeable impact on the financial sectors of states explicitly opposed to the tax – something which remains politically explosive in terms of EU precedent.
Again, with the FTT now slowly ambling along in zombie mode we’re sure this is not the last we have heard of it.