While France has indicated it wants to limit fees to stocks at the start of the levy’s gradual introduction, German Finance Minister Wolfgang Schäuble said on March 5 that taxing derivatives transactions immediately “makes sense".
“Other Member States are signalling that they’re ready to talk about possibly including derivatives in the first phase", Antje Tillmann, the finance spokeswoman for Merkel’s governing Christian Democratic bloc in parliament, said in written replies to questions on March 14. “I view that as a good sign", though there’s no agreement yet, she said.
“We’re getting closer to an agreement", said Ingrid Arndt-Brauer, the head of the German parliament’s Finance Committee, whose members are briefed by the Finance Ministry on government policy. “There are signs that Hollande is ready to include derivatives in a financial-transaction tax.” It isn’t clear which kinds of derivatives would be covered under this plan, Arndt-Brauer said in an interview.
Germany and France will work with the other nine countries with the goal of reaching an accord before the European Parliament elections in May, French president Hollande said after talks with German chancellor Merkel in Paris on February 19.
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Deals from the multi-trillion euro a day foreign exchange market could in principle be included in a tax on financial transactions, a legal opinion from European Union lawyers seen by Reuters said. While effectively ruling out the inclusion of the vast forex market from a transaction tax proposal now on the table, it leaves the door open for the sector to be included later on. Legal opinions from the bloc's lawyers in Brussels have heft, and a previous one last September which questioned the legality of one aspect of the planned tax triggered a long delay and a fundamental rethink.
The legal opinion, dated 14 March, says that, in principle, including spot currency transactions in a tax "would not necessarily be incompatible with the free movement of capital". Adding foreign exchange transactions to the existing proposal, however, would exceed the powers of Member States to amend it, the legal opinion added.
The European tax proposal was written by the bloc's executive European Commission which left out foreign exchange from the list of transactions to be taxed, such as those in stocks, bonds and derivatives. The EU executive believed the bloc's treaty prohibits curbs on the movement of capital such as for payments for goods and services. The opinion said this reasoning overlooks the case of including spot currency transactions that are not linked to any underlying transaction, meaning speculative trades.
The legal opinion says because spot currency transactions are not "financial instruments" under EU securities law, they cannot be added to the current proposal which only mentions taxing legally defined financial instruments. "In this respect, the inclusion of spot currency transactions in the scope of the proposal would... expand to a wide range of transactions that are not related to financial markets", the opinion said.
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Leaked opinion © Financial Times