On some aspects of the envisaged tax on financial transactions

As is well known, as a result of the financial crisis ÅU's two major member states - France and Germany exerted pressure on the European Commission to introduce the so called tax on financial transactions. Consequently, on 28th September 2011 the European Commission presented a proposal for a Council Directive for a common system of financial transaction tax and amending Directive 2008/7/EC. At present, trading of securities in most EU member states is not taxed. It is believed that one of the aims of the Commission besides the generation of significant revenue for strengthening the stability of the Currency Union is also putting in place disincentives for short-term speculation on the respective financial market, the idea obviously being that taxing the transactions will render this type of financial activity considerably less attractive. Resistance to the imposition of such a tax first came from the UK for understandable reasons as London is a world's major financial center. Reservations concerning the introduction of the tax have been also expressed by a number of other European countries largely on the grounds that for the first time a tax common for all EU member states is not a member-state's sovereign decision but imposed by EU institutions. It is considered a first step in the adoption of a common tax system for the corporate and income taxation in all of Europe, and a retreat from the principle that each nation can introduce different tax measures from those of the other EU nations. The tax is expected to be levied upon every single financial transaction involving a party whose registered office is on the territory of the EU. The transaction must also involve the participation of a financial institution. As it stands now the idea for the scope of the tax is to not tax transactions which do not involve financial institutions. Hence, the participation of a financial institution is presumed in all cases, regardless of whether the financial institution acts on its own behalf and for its own benefit or as an agent for another entity. With regard to the existing restriction on cash payments in some European countries, including Bulgaria, it is planned that the tax will affect almost all types of financial transactions. The definition for a financial institution reads a company which meets the following conditions: - Has obtained the respective EU member-state -issued permission or license for conducting financial activity, e.g. bankingrn- Has a registered address in an EU member-state. - Has a permanent address in an EU member-state. Financial institutions registered outside the EU but maintaining branches in the EU territory and licensed to conclude transactions in the EU territory are also defined as financial institutions, hence subject to this tax. The place of enforcement of the tax is irrelevant. It is also of no importance if the financial institute acts on its own behalf and for its own benefit or as an agent for another entity. The tax is envisaged to cover all types of financial products with the exception of first emission securities. The Directive is not aimed at taxing the issuance of securities itself, but at the taxing trading in those securities on the secondary market. It is expressly expected that the transactions of the central banks will fall out of the scope of the Directive (the European Central Bank and the national banks).