The European Union financial transaction tax (EU FTT) is a proposal made by the European Commission to introduce a financial transaction tax (FTT) within some of the member states of the European Union (EU).
The proposed EU financial transaction tax would be separate from a bank levy, or a resolution levy, which some governments are proposing to impose on banks to insure them against the costs of any future bailouts. It was initially claimed the tax, as proposed, would raise 57 billion Euros per year if implemented across the entire EU.
The first proposal for the whole of the EU was presented by the European Commission in 2011 but did not reach a majority. Instead, the Council of the European Union authorized member states who wished to introduce the EU FTT to use enhanced co-operation. The Commission proposed a directive for an EU FTT in 2013 but the proposal stalled. In 2019 Germany and France released a proposal based on the French financial transaction tax and the finance ministers of the states participating in the enhanced cooperation came to the consensus that the EU FTT should be negotiated using this proposal.
According to early plans, the tax would impact financial transactions between financial institutions charging 0.1% against the exchange of shares and bonds and 0.01% across derivative contracts, if just one of the financial institutions resides in a member state of the EU FTT. To avoid an unwanted negative impact on the real economy, the FTT will not apply to: Day-to-day financial activities of citizens and businesses (e.g. loans, payments, insurance, deposits etc.). Investment banking activities in the context of raising capital. Transactions carried out as part of restructuring operations. Refinancing transactions with central banks and the ECB, with the EFSF and the ESM, and transactions with EU.
History On 28 June 2010, the European Union's executive said it will study whether the European Union should go alone in imposing a tax on financial transactions after G20 leaders failed to agree on the issue. The following day the European Commission called for Tobin-style taxes on the EU's financial sector to generate direct revenue for the European Union. At the same time it suggested to reduce existing levies coming from the 27 member states.
European Commission proposal
On 28 September 2011, president of the European Commission José Barroso officially presented a plan to create a new financial transactions tax "to make the financial sector pay its fair share", pointing out that the financial sector received 4.6 trillion euros from EU member states during the crisis. In December 2012 the European Commission's State Aid Scoreboard revealed a new figure saying the volume of national support to the financial sector between October 2008 and 31 December 2011 amounted to around 1.6 trillion euros (13% of EU GDP), two-thirds of which came in the form of State guarantees on banks' wholesale funding.
Given 10 EU member states already have a form of a financial transaction tax in place, the proposal would effectively introduce new minimum tax rates and harmonise different existing taxes on financial transactions in the EU. According to the European Commission this would also "help to reduce competitive distortions in the single market, discourage risky trading activities and complement regulatory measures aimed at avoiding future crises".
The Commission proposal requires unanimity from the 27 Member States to pass. France, Germany, Spain, Belgium, Finland spoke in favor of the EU proposal. Austria and Spain are also known to support an EU FTT. Nations that oppose the proposal include the United Kingdom, Sweden, the Czech Republic and Bulgaria. Particularly the UK government has expressed strong views about the negative impact of the tax and is expected to use its power of veto to block the implementation of this proposal, unless the tax was to be introduced globally. The likelihood of a global FTT is low due to opposition from the United States. As a way out, advocates of the FTT such as the finance ministers from Germany, Austria and Belgium have suggested that the tax could initially be implemented only within the 17-nation eurozone, which would exclude reluctant governments like the United Kingdom and Sweden. If adopted, the EU FTT would have come into effect on 1 January 2014.
In October 2012, after discussions failed to establish unanimous support for an EU-wide FTT, the European Commission proposed that the use of enhanced co-operation should be permitted to implement the tax in the states which wished to participate. The proposal, supported by 11 EU member states representing more than 90% of Eurozone GDP was approved in the European Parliament in December 2012 and by the Council of the European Union in January 2013 with 4 EU members abstaining: Czech Republic, Luxembourg, Malta and the UK.
On 14 February 2013, the European Commission put forward a revised proposal outlining the details of the FTT to be enacted under enhanced co-operation, which was only slightly different from its initial proposal in September 2011. The proposal was approved by the European Parliament in July 2013, and must now be unanimously approved by the 11 initial participating states before coming into force. EU member states which have not signed up to the FTT are able to join the agreement in the future.
The legal service of the Council of the European Union concluded in September 2013 that the European Commission's proposal would not tax "systemic risk" activities but only healthy activities, and that it was incompatible with the EU treaty on several grounds while also being illegal because of "exceeding member states' jurisdiction for taxation under the norms of international customary law". The Financial Transaction Tax can no longer be blocked by the Council of the European Union on legal grounds, but each individual EU member state is still entitled to launch legal complaints against the FTT if approved to the European Court of Justice, potentially annulling the scheme. On 6 May 2014, ten out of the initial eleven participating member states (all except Slovenia) agreed to seek a "progressive" tax on equities and "some derivatives" by 1 January 2016, and aimed for a final agreement on the details to be negotiated and unanimously agreed upon later in 2014.
In June 2013, the commission announced that a January 2014 launch for the FTT was no longer realistic, but that it "could still enter into force towards the middle of 2014." The following month, Algirdas Šemeta, European Commissioner for Taxation and Customs Union, Audit and Anti-Fraud, said that "The Commission is ready to examine the suggestions made for an initial introduction of the tax with lower rates for products of specific market segments" including "both government bonds and pension funds." He left open the possibility the rate for these segments could be increased in the future.
On 6 May 2014, ten out of the initial eleven participating member states (all except Slovenia) agreed to seek a "progressive" tax on equities and "some derivatives" by 1 January 2016, and aimed for a final agreement on the details to be negotiated and unanimously agreed upon later in 2014.
In December 2015, Estonia announced that it no longer supports the financial transactions tax, due to concerns that the latest revised version of the tax would hardly generate any revenue, while at the same time scaring away traders.
The United Kingdom's withdraw from the EU in 2020 was expected complicate collection of the taxes, which has led to delays in negotiations.
In October 2025 the European Commission announced that it planned to withdraw the proposed directive on the FTT within six months.
Scope The tax would be levied on all transactions on financial instruments between financial institutions when at least one party to the transaction is located in the EU. It would cover 85% of the transactions between financial institutions (banks, investment firms, insurance companies, pension funds, hedge funds and others). House mortgages, bank loans to small and medium enterprises, contributions to insurance contracts, as well as spot currency exchange transactions and the raising of capital by enterprises or public bodies through the issuance of bonds and shares on the primary market would not be taxed, with the exception of trading bonds on secondary markets. + Revenue Estimate for EU Financial Transaction Tax Tax base Tax rate Revenue estimate (€ billion)Securities:Shares0.1%6.8Bonds 0.1%12.6Derivatives:Equity linked 0.01%3.3Interest rate linked 0.01%29.6Currency linked 0.01%4.8EU total57.1 Following the "R plus I" (residence plus issuance) solution an institution would pay the tax rate appropriate to the country of its residence, regardless of the location of the actual trade.Sieling, Carsten (May 2012): Financial Transaction Tax. Sensible, Feasible, Overdue. Friedrich-Ebert-Foundation Retrieved 6 June 2012 In other words, the tax would cover all transactions that involve European firms, no matter whether these transactions take place within the EU or elsewhere in the world. If acting on behalf of a client, e.g., when acting as a broker, it would be able to pass on the tax to the client. Hence, it would be impossible for say French or German banks to avoid the tax by moving their transactions offshore.
Tax rate and revenues Naturally estimated revenues may vary considerably depending on the tax rate but also on the assumed effect of the tax on trading volumes. An official study by the European Commission suggests a flat 0.01% tax would raise between €16.4bn and €43.4bn per year, or 0.13% to 0.35% of GDP. If the tax rate is increased to 0.1%, total estimated revenues were between €73.3bn and €433.9bn, or 0.60% to 3.54% of GDP.
The official proposal suggests a differentiated model, where shares and bonds are taxed at a rate of 0.1% and derivative contracts, at a rate of 0.01%. According to the European Commission this could approximately raise €57 billion every year. Much of the revenue would go directly to member states. The United Kingdom e.g. would receive around €10bn (£8.4bn) in additional taxes. The part of the tax that would be used as an EU own resource would be offset by reductions in national contributions. EU member states may decide to increase their part of the revenues by taxing financial transactions at a higher rate.
The levy that 11 Eurozone countries are expected to introduce could raise as much as €35bn a year.
Legal challenge In March 2013, the UK's European Union Committee of the House of Lords urged the British government to challenge the FTT at the European Court of Justice due to concerns over the impact of the tax on non-participating states such as the UK. Lyndon Harrison, chair of the committee, suggested that "although the European Commission denies it, it is our view that UK authorities will be under an obligation to collect the tax." A report, commissioned by the City of London Corporation, which was published in April 2013 claimed that the tax would raise the UK's debt financing costs by £4 billion. On 3 April 2013, Czech Prime Minister Petr Nečas said that the FTT was unacceptable, and refused to rule out challenging it with the European Court of Justice.