Article by Emma Purdy, Steven Baum, Jason Swales and Jillian Welch

On October 23, 2012, the European Union (EU) Commission adopted a proposal for a Council Decision, stating that the EU Member States in favour of introducing an EU Financial transaction tax (FTT) may do so through Enhanced Cooperation.

After careful legal analysis, the Commission concluded that all legal requirements for authorization have now been met and that the 10 participating Member States (i.e., Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain) should be allowed to move forward.

More specifically, the EU Commission's view is that Enhanced Cooperation for an FTT will not undermine the internal market or economic, social and territorial cohesion, nor will it distort competition or create a barrier to, or discriminate in, trade. This view is expected to be challenged during the imminent political debate.

If the proposal is adopted by the Council, the 10 participating Member States will be authorized to establish Enhanced Cooperation among themselves for a common FTT system by applying the relevant provisions of the (EU) Treaties. Estonia, mentioned as the eleventh Member State in favour, apparently has withdrawn at the last moment.

The present proposal for a Council Decision concerns only the necessary authorization of Enhanced Cooperation for an FTT and is intended to create an adequate EU legal basis for it. The EU Commission plans to submit a proposal for specific measures implementing Enhanced Cooperation (i.e., in substance, for a Directive on a common FTT system) in due course.

The new proposal's scope and objectives will be based largely on the original Commission proposal. It remains to be seen whether this will leave enough room for the EU Commission to address the significant criticism raised relating to the original proposal.

Next steps

This proposal is an important step towards Enhanced Cooperation among the 10 Member States. At the next Economic and Financial Affairs Council (ECOFIN) on November 13, 2012, EU Tax Commissioner, Algirdas Semeta, is expected to present the Commission's assessment of the participating Member States' requests, as well as this draft Council Decision.

The objective is to get authorization from the Council for the 10 Member States to start Enhanced Cooperation by December 2012, as EU leaders instructed on June 28 to 29, 2012, in their Compact for Growth and Jobs. Authorization requires an EU-27 qualified majority vote in the Council (in this case 74% of Member States' votes, representing 62% of the EU's population), after obtaining the consent of the European Parliament, which has already been given.

The likely effective date of the "EU-wide" FTT is January 1, 2014.

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