During negotiations in relation to the European financial transaction tax ("FTT"), it became clear that it would be difficult to reach consensus across the 27 Member States. At the request of 11 Member States, namely France, Germany, Belgium, Portugal, Slovenia, Austria, Greece, Italy, Spain, Slovakia and Estonia, the European Commission has adopted a proposal to implement the FTT under the "enhanced cooperation" procedure.
The FTT shall be implemented by January 2014 only by those Member States opting into the "enhanced cooperation" procedure.
Nonetheless, the FTT will have an impact on investors all over the world. Indeed, in its current form, the FTT would be levied on all transactions on financial instruments between financial institutions when at least one party to the transaction is located in a participating country (i.e. when at least one party is located in a country participating in the enhanced cooperation).
The United Kingdom has officially launched a challenge against the European Commission in the European Court of Justice in respect of the proposed implementation of the FTT under the "enhanced cooperation" procedure. Following this, Luxembourg announced on May 8th 2013, through the publication of a Q&A on the matter, that it would not opt for such enhanced cooperation.
Luxembourg is not opposed philosophically to the FTT but...
In this Q&A, Luc Frieden, the Luxembourg Finance Minister has indicated that "Luxembourg is not opposed philosophically to the FTT" but, due to the growing interdependence of the financial world, it must be looked on a global level and not just at a regional level by 11 countries. He warns that implementation of the FTT through the "enhanced cooperation" procedure could lead to fragmentation of the single market and capital flight from the non-participating Member States..
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