Countering criticisms that a 0.1 percent tax on EU financial transactions breaches EU law, lawyers advising the European Commission said in a memo first seen by Reuters that “the proposed Financial Transaction Tax (FTT) directive is in conformity both with customary international law and EU primary law.”
In September, the so-called Tobin tax was put into doubt after a European Council memo was leaked saying it may breach EU law.
“Whilst doubts as to the FTT's legality remain, it would be brave – some would say reckless – for the Commission to proceed with a tax that could later be overturned,” said Clifford Chance tax partner Dan Neidle in response to the European Commission memo.
“If the Commission wants to persuade people the FTT is legal they need to publish their opinion in full, not merely assert that the issue has gone away.”
The tax was due to be enforced in 11 countries through “enhanced cooperation” – a term describing nine or more EU member states deciding to move ahead with an initiative proposed by the Commission once it proves too difficult to reach unanimous agreement in all member states.
But because only 11 of the 28 EU members signed on to the controversial tax, the leaked Council memo said it would be “discriminatory and likely to lead to distortion of competition to the detriment of non-participating member states.”
If implemented, the tax would hit transactions by private equity fund managers when purchasing or selling shares, bonds or options in portfolio companies beginning in early 2014.