With the proposal to introduce a Financial Transaction Tax (FTT) in 2011, the European Union once aimed at ensuring that the financial sector made its fair share to dealing with the consequences of the financial crisis of 2007/08. Although, Deutsche Börse Group understands this objective, it believes that this is already being achieved through other initiatives implemented over the past decade to promote financial market stability.

Moreover, according to many studies, the FTT does not bring the hoped-for gains, but instead brings unintended consequences and runs counter to many of the European Commission’s current key regulatory initiatives, including the Capital Markets Union (CMU).

Expected consequences include the relocation of business to other countries without an FTT to avoid taxation, which would weaken regulatory oversight and control as well as European Union’s competitiveness. Negative effects are also expected on private pensions and the real economy, as the tax would likely be borne by the retail investor – and this against the backdrop that retail investor participation is considered crucial for private sector wealth creation and is a key objective of the CMU. Similarly, the FTT may further discourage small and medium-sized enterprises (SMEs) from entering capital markets by creating additional tax burden at a time when supporting SMEs is actually at the heart of the European Commission’s policy initiatives.

Over the years, both the European Commission and the German government have repeatedly launched initiatives to introduce an FTT. In 2015, under the so called ‘enhanced cooperation’, ten Member States of the European Union, including Germany and France, announced that they had reached an agreement “in principle”. However, to this date, no legally binding agreement has been reached.