The European Commission’s proposal for a tax on financial transactions breaks international law and the EU treaties, according to a legal opinion for the Council of Ministers.
The tax, which is supposed to discourage speculative trading, “infringes upon the taxing competences of non-participating member states” and “exceeds member states’ jurisdiction for taxation under the norms of international customary law as they are understood by the Union”, according to the opinion, dated 6 September.
However, Germany – a leading supporter of the tax – and the European Commission reaffirmed their support for the proposal today (10 September).
“FTT is legally sound and fully complies with EU Treaties and international tax laws,” Algirdas Šemeta, the European commissioner for taxation, customs, anti-fraud and audit, wrote on Twitter.
A spokeswoman for Germany’s finance ministry said that the government had pushed for the tax “for good reasons”. “This has not changed in the least,” she said. “The legal concerns must now be clarified and dispelled as quickly as possible.”
The legal opinion focuses on a provision in the proposal that trades would be taxed based not on where they are executed but on the location of the headquarters of the financial institutions involved. This, it says, would likely lead to distortion of competition.
The Commission’s proposal, put forward in February, is supposed to apply in the 11 member states that have signed up to a procedure known as enhanced co-operation – Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovenia, Slovakia and Spain. Other EU member states would be able to join later.
Negotiations between the member states on the proposal have been going slowly, with different views of what kind of trades should be taxed
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Other member states, notably the UK, are opposed to the tax. The UK challenged the proposal in the European Court of Justice in April.