1) The document discusses a Financial Transaction Tax (FTT) proposed by the EU to tax financial transactions as a new source of revenue. 2) It summarizes the key elements of the proposed FTT, including a 0.1% tax rate on most financial transactions. Enhanced cooperation was used to allow some EU states to implement the tax while others opted out. 3) A court case involving the Italian FTT is analyzed, where the European Court of Justice ruled the Italian FTT did not violate the free movement of capital as the tax applied regardless of residence and was linked to assets issued in Italy. Compliance costs for non-residents could not be excessive.

1. The Financial Transaction Tax
as a Resource for the Crisis ?
Lyon, November 19th 2020
Marco Greggi, University of Ferrara
Visiting Professor, University of Lyon 3 “Jean Moulin”

2. Outline of the Presentation
1. The crisis we live: impact, disruption, costs;
2. A scramble for new (taxable) bases in the long run ?
3. The FTT (aka Tobin Tax) Case, as it was, as it is … as it will be ?
4. The case law: Société Générale;
5. Concluding remarks.
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3. The Current Scenario
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WHO data plotted by the Author
1. Asymmetric impact in the Continent;
2. No clear pattern of incidence (no North-South
or East-West dichotomy);
3. Different policies in progress as to address the
situation in the different States of the Union.

4. The Debt Adjustment
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Eurostat data plotted by the Author
1. Traditional pattern confirmed in absolute terms;
2. Trajectory of convergence towards the Southern model ?
3. Temporary suspension of the Eurocurrency
constraints in term of Deficit/GDP and Public debt / GDP:
• Italy non compliant on both.
• Covid-19 response essentially debt-based.

5. GDP Variations in 2020
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1. Further evidence of the different
resilience levels by countries across
the European Union;
2. Economic data are essential con
conceive and deploy a proper tax
policy reaction to Covid-19;
3. Traditional measures arguably
inefficient, including:
• Income tax adjustments;
• VAT / Consumption tax
adjustments.
European Commission data plotted by Philipp Heimberger

6. Euro Fluctuation in 4 Scenarios
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Euro - Yuan Euro – Swiss franc
Euro – US Dollar Euro - Bitcoin
Data: Google Finance

7. European Strategy
• In the short run:
• VAT and Customs tax adjustment on medical equipment needed for Covid-19
treatment;
• Relaxation of the State Aid discipline (Article 107 and Article 108 TFEU) as to
allow unilateral measures by the member state in a case-by-case scenario;
• The Commissioner patrols the extended boundaries of the State Aid doctrine
as to prevent abuses.
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8. In the Medium Run
• Support mitigating Unemployment Risks in Emergency Programme
(aka SURE) Regulation (EU) 2020/672;
• Financial assistance granted by the Commission budget as to provide support
to unemployed people (minimum salary, social support);
• Italy’s position in the framework of SURE Regulation (Council
implementing decision 2020/0219(NLE)):
1. Summer installment: € 27.438.486464. The loan shall have a maximum
average maturity of 15 years.
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9. The Quest for New Taxable Bases
• Digital Taxation;
• Problem: EU – USA Relations;
• The CC(C)T Base;
• Problem: alteration of a “known” tax base, reallocation of budget resources;
• The Financial Transaction tax:
• Problem: the “Enemy within” (UK, Luxembourg, …);
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10. Preliminary Remarks
• Analysis of the FTT in a legal perspective:
1. Rationale of the Tax;
2. (Very) Basic Structure;
• Spill-over effects (if any)
3. Consistency with EU law (TFEU, …);
4. Concluding remarks.
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11. Theoretical Background
• James Tobin (1972) suggested the implementation of a Currency
Transactions Tax;
• Purpose: Stabilization exchange ratios;
• Theory hijacked later on by stakeholders urging for a comprehensive
tax targeting all the Financial Transactions.
• Purpose: uncertain / various (compensation, retaliation, …).
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12. EU Commission’s Goal
(at the Beginning)
• Two draft proposal (COM(2011) 549 and COM (2013) 71); inspired by
the same philosophy:
• Assess a new taxable base;
• Compensate Member States and the EU from the costs of the bail-
outs;
• Compensative logic in taxation (!): first time in in EU law (exception:
‘Polluters-pay-principle’ in environmental taxation).
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13. Methodology
• (Two) Directive proposal(s) in order to introduce / harmonize FTT
across Europe considering:
• ‘Neighbourhood’ issues:
• VAT (article 401, 2006/112/EC);
• National taxes already in force:
• France, Italy;
• UK (Stamp tax ?);
• …
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14. (Very) Basic Structure
• Indirect tax on financial transactions applied with a rate of no less
than 0,1% of the value of the asset exchanged;
• What is ‘Financial’ ?
• Definition provided by another Directive (2004/39/EC) (itemized approach)
• What is ‘Transaction’ ?
• Sale and alike operations (listed by the directive itself (Article 2 (2)).
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15. Possible Loopholes ?
• Not so easy to be found;
• ‘Catch all’ provisions (see Article 1 (3) (j))
• Most of the derivatives and hybrid instruments covered as well;
• GAAR enshrined in the text of the Directive;
• Infrequent in EU Directives;
• Generally relying on national provisions about avoidance / evasion;
• Now redundant due to ATAD-1 and ATAD-2 implementation ?
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16. Taxpayers
• Potentially: whoever (Financial institution) enters into the
transactions considered;
• Ad personam exemptions (Institutional investors, qualified market
makers, …);
• The ‘contract makes the taxpayer’, just like in most of indirect taxes;
• The most serious point concerns territoriality …
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17. Taxpayers (Continued)
• Resident investors (and their proxies) are liable to tax;
• News of the second release of the Directive: the issuance principle;
• The tax targets every financial instrument issued within (qualified Member
States of) the Union;
• ‘Tax-follows-the-instrument’ approach:
• Higher compliance costs, spill over effect on third countries investors which shall be
targeted by the tax (possible double taxation ?)
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18. Consistency with EU Law
• FTT and enhanced cooperation: First time in EU tax law for such an
important field;
• The mechanism:
• EU law’s application is splitted within the EU;
• Some states commit themselves to implement the directive, some other not;
• ‘Jerrymandering’ effect of EU law within the EU territory ?
• Higher complexity for EU and Non EU investors.
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19. States Involved
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20. Enhanced Cooperation
• It’s a ‘Extrema ratio’ instrument to be adopted;
• TFEU (Article 327): political reasons justified its implementation;
• Powerful instrument but not for free:
• Consistency with EU Law;
• Consistency with EU Principles;
• No Spill Over effects (o ‘Third-but-belonging-to-EU’ Countries).
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21. A Non-Case
• C-209/13 The UK vs. EU Council (April 18th 2013);
• Grounds of the Appeal:
1. Violation of Article 327 TFEU (Any enhanced cooperation shall respect
the competences, rights and obligations of those Member States which
do not participate in it.);
• Externalities on states which opted out.
2. Violation of International customary law;
• Extraterritorial effects of taxation
3. Violation of Article 332 TFEU;
• Costs incurred by States which opted out (negative externalities).
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22. How it Ended
• 38 Further, and irrespective of whether the concept of ‘expenditure
resulting from implementation of enhanced cooperation’, within the
meaning of Article 332 TFEU, does or does not cover the costs of mutual
assistance and administrative cooperation referred to by the United
Kingdom in its second plea, it is obvious that the question of the possible
effects of the future FTT on the administrative costs of the non-
participating Member States cannot be examined for as long as the
principles of taxation in respect of that tax have not been definitively
established as part of the implementation of the enhanced cooperation
authorised by the contested decision.
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23. Enhancing FTT ?
• With the only exception of VAT (included in the Treaty) and Savings
taxation, no directives imposed new taxes on EU citizens;
• A new trend in European legislation ?
• Is ‘compensation’ a sound reason for introducing this tax ?
• Is the price we pay proportional with the gal to be achieved ?
• Lack of International coordination (Double taxation ?)
• Issues still on the floor (follows …)
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24. Neighbourhood Issues
• FTT and VAT:
• Article 15: FTT is not VAT;
• They can coexist;
• No other tax is however permitted on Financial transactions.
• FTT and 2008/7/EC
• Directive on the raising of capital is still fully applicable (see Article 5 (1)(e)
and 5 (2))
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25. Avoidance and Anti-avoidance
• Article 13, a special purpose GAAR before the ATAD !
• Artificial arrangements may be ignored;
• Relevance of the ‘economic / commercial substance’ of the operation;
• Avoidance = Defeat of the ‘object, spirit and purpose of the tax
provision’;
• Cases (Article 13 (3) (e)): need for symmetry between risk and tax benefit.
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26. Is it worth while ?
• First proposal: revenue estimated between € 30 – 35 Billion;
• Second proposal: € 31 Billion;
• Less states;
• Broader taxable base (issuance principle);
• A possible new own resource for the EU Budget ?
• Forecasts were as old as 2012: expansion of the Financial sector to be
considered.
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27. More Accurate Forecasts
by the Commission
• As already stated in the Impact Assessment accompanying the
Proposal for a Council Directive on a Common system of financial
transaction tax and amending Directive 2008/7/EC (SEC(2011) 1102),
at a tax rate of 0.1% for securities and of 0.01% of the notional value
for derivatives agreements and payable by each side of a transaction,
the revenue estimates for the tax are about €57bn.
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28. Alternative Solutions ?
• Rethinking VAT exemption of the financial sector;
• History of exemptions in EU VAT is well known;
• Time to adjust the list improving VAT neutrality and simplifying the
system.
• Tax burden not neutral in EU – Non EU perspective !!!
• Law step aside, politics begin …
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29. The latest developments,
the Société Générale case
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Italian Branch
30 April 2020, C-565/18

30. The Dynamics of the Case
• Italian Branch of the French Financial company exposed to the local
(i.e. Italian) Financial Transaction Tax on qualified operations
managed on local financial assets;
• Target of the Italian FTT:
• Contracts / operations on financial instruments issued by entities resident in
Italy.
• Financial instruments wherever issued / by whomever issued … as long as the
underlying asset is an instrument issued by an entity resident in Italy.
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31. Assessing the Taxpayer
• Taxpayer: the entity / individual purchasing the asset (the transferee
of the asset);
• Intermediaries and proxies (Banks, Financial companies, …) :
• Not subject to the tax;
• Obliged to charge it and withhold the due amount (significant compliance
duties and high level of responsibility in case of violation of the law).
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32. The Legal Framework of the Tax
(in Italy)
• Introduced with the Finance Act on December 24th 2012, n. 228 (Mario
Monti’s Government, right after Berlusconi’s one amidst the Italian
Financial Crisis);
• Article 1, §§ 491, 492 and 494;
• Indirect tax on the transaction as such (indirect tax);
• Targeting operation which are normally VAT exempt (or fall outside the scope of VAT
depending on the specific circumstances);
• Revenue expected (annual basis): € 1 – 1,5 Billion;
• Revenue collected (annual basis): € 250 – 300 Million (Data: MoF).
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33. The Quantitative Impact
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Financial instrument More than
1000
Contratsà terme standardisé s(futures), certificats, warrants couverts et contrats 0,01875 0,0375 0,075 0,375 0,75 3,75 7,5 15
Contratsà terme standardisé s(futures), warrants, certificats, warrants couverts et 0,125 0,25 0,5 2,5 5 25 50 100
Contrats d’ échange (swaps) sur les actions et rendement, indices ou mesures
correspondants
Contratsà terme lié sà des actions et rendement, indices ou mesures
correspondants
Contrats financiers avec paiement d’ un diffé rentiel lié aux actions et aux
rendements, indices ou mesures correspondants
aux actions et aux rendements, indices ou mesures correspondants
Combinaisons des contrats ou des titres pré cité s
0,25 0,5 1 5 10 50 100 200
Ordinary transactions on shares and financial instruments OTC: 0,2% (reductions apply if the transaction takes
places on the stock market).

34. The Point under the Law
• The Italian financial Transaction tax in conflict with:
• Domestic provisions (ability to pay principle);
• EU Fundamental Freedoms including (art. 18, 56 and 63 TFUE):
• Free delivery of (financial) services in the Market;
• Free circulation of capitals (in the market / from the market).
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35. Preliminary Finding of the Court
• Fidium Finanz Doctrine (C-452/04 October 3rd 2006):
• When two fundamental freedoms are invoked by the plaintiff, the
Court picks the one more pertinent to the circumstances of the case
and rules in the light of that;
• In Société Générale free movement of capital was considered more coherent
with the events as described and with the law as introduced.
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36. The Core of the Decision
• No discrimination:
• As the tax is charged irrespective of the place where the investor is resident. It is
charged on asset issued in Italy or on derivatives built on assets issued in Italy;
• The “issuance” principle is considered an acceptable “genuine link” to justify the
power to tax of a state
• No prejudice to the free circulations of capital:
• As in the field of direct taxation there is no significant harmonization in this context
and thus no duty of the states to converge on similar tax patterns in this respect
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37. Compliance Costs
• Compliance costs are relevant in the enforcement of the Law;
• They are to be kept reasonable and proportional to the scope of the
tax, otherwise a possible conflict with EU law might emerge in this
respect only (see § 53 of the Advocate general conclusions).
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38. Conclusion of the Court
• L’article 63 TFUE doit être interprété en ce sens qu’il ne s’oppose pas à une
réglementation d’un État membre qui soumet à une taxe les transactions
financières portant sur des instruments financiers dérivés, pesant sur les parties à
l’opération, indépendamment du lieu où la transaction est conclue ou de l’État
de résidence de ces parties et de l’éventuel intermédiaire intervenant dans
l’exécution de celle-ci, dès lors que ces instruments ont pour titre sous-jacent un
titre émis par une société établie dans cet État membre. Les obligations
administratives et déclaratives accompagnant cette taxe incombant aux entités
non-résidentes ne doivent toutefois pas aller au-delà de ce qui est nécessaire
pour le recouvrement de ladite taxe.
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39. Personal Conclusion
• What about the enhanced collaboration between states ?
• Can the collaboration be considered as relevant by the ECJ as to justify the
decision in one sense or in another ?
• Are possible discrepancies between the French and the Italian model relevant
as to the final judgment ?
• The ECJ has been somehow reluctant to investigate this aspect: it could have
demanded to Italy an higher level of compliance because of the cooperation,
making this commitment a relevant benchmark for the application of Article
63 TFUE (alas, no reference to this in the text of the sentence).
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40. Thanks for your Attention
marco.greggi@unife.it
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