The Commission's Proposal for a Common System of Financial Transaction Tax: A Legal Appraisal

The Commission's proposal for a Directive on a common system of financial transaction tax (FTT) is the first EU proposal for a broad-based FTT. It is proposed to be implemented in the EU by 1 January 2014. The FTT is to be applied to financial transactions with financial instruments where a financial institution is party to the transaction. In this legal appraisal of the proposal, key issues arising in the proposal are discussed, foremost concerning the scope of the tax. The proposal is benchmarked against key design features identified by commentators - the susceptibility to migration to financial transactions not covered by the FTT and to foreign territories. It is concluded that the scope is broad enough with regard to the coverage of financial transactions and that the definition of financial institutions is almost too broad. Migration to other territories will be possible but not as easy to realize as under the abolished Swedish FTT. It is also concluded that there are a number of legal uncertainties in the proposal that need to be clarified.