The EU Council’s Legal Service issued a favorable opinion regarding the inclusion of foreign exchange activities in the scope of FTT. According to an opinion published on March 14 2014, the inclusion of spot currency transactions would “not necessarily be incompatible” with EU law.
However, the Council acknowledges that adding foreign currency transactions to the existing proposal would “exceed the Council’s power of amendment”: it goes beyond the powers the 11 member states have to forge their own tax under so-called “enhance cooperation”. If pursued, the legislative file would have to be re-proposed by the Commission which is unlikely to happen.
By admitting there is no law in principle preventing a joint levy on foreign exchange, the opinion from the EU Council legal services contradicts the Commission’s own legal services that have also consistently stated the taxation of spot currency transaction is illegal.
One year ago, France, one of the bigger supporters of Europe’s planned financial transaction tax, expressed their concerns regarding major flaws in the European Commission proposal and already at that time claimed that it should be extended to currency trades. According to Paris, the tax should be moved to an “issuance principle” – covering equities, some bonds and a narrow range of derivatives.
Although one may say this opinion opens the door to a forex FTT, France’s pressures only had limited success, which can indicate how unlikely this recent opinion is to have an impact on the policy debate within the 11 Eurozone countries that agreed to an FTT.
Although this is not the final word on which direction the FTT should take, Algirdas Semeta, European Commissioner for Taxation and Customs Union, Audit and Anti-Fraud, recently stated in an interview that he was “cautiously optimistic” a revised proposal would be issued before European Parliamentary elections in May this year.
Please read here the EU Council's Legal Service's opinion.