About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

Stepping Stones to the EU FTT

Subscribe to our newsletter

By Anne Plested, EU Regulation Change at ION Markets, Fidessa.

A Europe-wide financial transaction tax (FTT) was initially proposed by the European Commission (EC) in September 2011. The aim was to avoid an uncoordinated patchwork of national taxes and take a standard approach across Europe. In the aftermath of the financial crisis, this type of bank levy was politically highly attractive for many individual states. Transaction taxes would not only force the financial sector to make a fair and hefty contribution to public finances, they would also discourage transactions that were seen as not contributing to the real economy.

Put forward as the tax that could raise €57 billion per year if implemented across the whole EU, nothing has been finalised despite almost 8 years of discussions. Common agreement on the proposals was ruled out as early as 2012, when just 11 of the 28 EU countries requested enhanced cooperation to move ahead with the initiative. Progress appears to be slow. As momentum has waned under the tsunami of regulation washing over the region in recent years, an outsider might assume that the idea had been all but quashed. However, this spring the supporting states announced some progress and there remains a determination to push through to implementation.

Belgium, Germany, Greece, Spain, France, Italy, Austria, Portugal, Slovenia, and Slovakia still support the project. The FTT zone of now 10 participating countries would plough the proceeds, potentially around €35 billion per year, back into their economies. Estonia withdrew its support in early 2016 after weighing the costs of implementation and collection against the expected returns. Having done the math, Slovenia has indicated that it may follow suit.

Most EU opponents of the FTT, such as the UK, would generally support such a tax as a global initiative, but they view anything regional as a competition risk for Europe. Scope and exemptions are another area of disagreement. However, most of the opposing states appear to be divided and remain on the fence, leaving the path open to join up later. All of them continue to monitor progress.

Meanwhile, in the early years following the proposal France and Italy went ahead and introduced their own FTTs. Their experience provides some helpful tips on the practicalities and pitfalls of implementation, and some useful insight into the fallout. With France observing a loss of business and a negative effect on share prices, the designers of the EU version can hopefully learn from that.

In fact, the most recent progress report cited the French tax as the model for the way forward. It’s also worth noting that under the original proposed Directive, the participating states will not be allowed to introduce taxes on financial transactions other than this FTT (and VAT). So it seems likely that the French and Italian FTTs will adapt to the EU proposal if adopted. Of course, many important details are yet to be defined. Not least the instruments in scope for the application of the new tax, the criteria for calculating it, and all the operational implications and collection responsibilities.
Consultation on the proposal is ongoing with the European institutions. Although all member states can take part in the discussions, only those participating in enhanced cooperation will have a vote and they must agree unanimously before anything can be implemented. So as finance ministers from participating countries continue to debate the technical points, a tax originally planned for 2016 now looks unlikely to come into force before 2020.

Subscribe to our newsletter

Related content

WEBINAR

Recorded Webinar: How to run effective client onboarding and KYC processes

Increasing cost, complexity and regulatory change continue to challenge firms implementing client onboarding and Know Your Customer (KYC) systems. With an effective strategy and a clearly defined pathway, it’s possible to gain a valuable competitive advantage whilst meeting those all-important compliance requirements. But how to get there? With a myriad of different options out there...

BLOG

A-Team Insight Announces RegTech Award Winners as APAC Navigates Compliance Complexity

A-Team Group is proud to reveal the winners of our inaugural Capital Markets Technology APAC Awards 2025, recognising the firms and solutions demonstrating exceptional innovation across the Asia Pacific region. Alongside this announcement, we have launched our in-depth annual report, “The State of Capital Markets Technology in Asia Pacific 2025”, which examines the key trends...

EVENT

AI in Capital Markets Summit New York

The AI in Capital Markets Summit will explore current and emerging trends in AI, the potential of Generative AI and LLMs and how AI can be applied for efficiencies and business value across a number of use cases, in the front and back office of financial institutions. The agenda will explore the risks and challenges of adopting AI and the foundational technologies and data management capabilities that underpin successful deployment.

GUIDE

Entity Data Management Handbook – Seventh Edition

Sourcing entity data and ensuring efficient and effective entity data management is a challenge for many financial institutions as volumes of data rise, more regulations require entity data in reporting, and the fight again financial crime is escalated by bad actors using increasingly sophisticated techniques to attack processes and systems. That said, based on best...