I took part in a debate on financial transaction taxes last night at the Law Society, and good event it was too.
One of my colleagues on the panel was Mr Rolf Diemer, Head of Unit “Environment and other indirect taxes” of the Directorate General for Taxation and Customs Union (DG TAXUD). It has to be said that there were occasions when it was hard to out a Rizzla between us, but the comment of his I liked most was:
Reports of the death of the financial transaction tax have been greatly exaggerated
This came, of course, in response to a legal opinion this week that the FTT now being operated by 11 EU states may be illegal because of its extra-territorial impact.
I actually think there are a number of appropriate responses to that suggestion, some of which Dr Diemer touched upon. The first is that this is just one aspect of the tax. the second is that it is just one opinion. The third is that reform would not stop an FTT.
But my most important reservation is a more serious one and it is that those who want to argue - as those who have promoted this opinion would seem to do - that a tax should not have extra-territorial impact should do so with care.
Remember how a secrecy jurisdiction is defined. Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain. That regulation is designed to undermine the legislation or regulation of another jurisdiction. To facilitate its use secrecy jurisdictions also create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so.
The impact of all tax haven activity is extra-territorial.
The impact of all tax competition is also extra-territorial.
If it is now illegal for a tax to have an extra-territorial impact the impact is enormous. It is of minor consequence for the FTT, where a few tweaks would solve the problem, but the impact on tax havens and tax competition would be wholly beneficial. Be careful for what you'd ask is what I'd say to those trying to use competition principles to beat the FTT: this could rebound on you, very strongly.
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No, you are confusing two different issues…….
The FTT is illegal because it forces another separate territory to impose a tax on its trades against what it may wish to do.
Tax haven behaviour has an economic impact on another territory (much like Capital controls or protectionism) but it does not force a territory to impose a tax against its will.
No, it steals its tax revenue instead
No , it takes its tax revenue through competition, otherwise by your comment if a company takes a competitors revenue by lowering its prices then it too is “stealing” revenue!
There is no comparison between firms and governments – unless you wish to contemplate failed states
The argument is that extra-territoriality is contrary to a particular condition for the use of the enhanced cooperation procedure that France, Germany and the others are using to introduce the FTT in 11 countries only. If correct this has no implications for legislation that’s not introduced via ECP, and certainly no implications for domestic laws that permit tax havens.
So tax abuse from tax havens is fine
But the choice of democratically elected governments is not
Can you confirm I have got you right?
eh? I said that the Council opinion is saying a particular technical condition for the FTT to be applied is breached by the extra-territoriality. If correct it follows that the FTT can’t be introduced in the way France, Germany and the others wish to. It has no implications for anything else. Your claim this meant extra-territoriality is generally “illegal” was not correct.
None of which has anything to do with my views of tax havens (which I generally would try to close down) or the EU seizing taxing powers from member states (which I am most certanly against).
There is really no need to be so aggressive.
Aggressive? Pardon?
You’re saying a contestable single opinion is proof and you accuse me of aggression?
I beg to differ
At worst there is a small change to make. And maybe the opinion is also wrong.
But FTTs will happen
And the point I have made on extra-territoriality is a real one for tax havens
I’m not saying that at all. Please read my posts again. I’m saying you have misunderstood what the opinion is saying, and your extra-territoriality point is based on that misunderstanding. You have a nasty habit of getting the wrong end of the stick and then questioning the motives of those who correct you.
And you may have noticed that when it comes to law there is, invariably, more than one opinion
And I disagree with you
Why do you assume you must be right? That’s your problem
You say the opinion says extra-territorality is of itself unlawful. It doesn’t – it’s making a technical point around enhanced cooperation. Please read the opinion again – it’s very clear and every commentary I’ve seen reads it this way. By continuing to defend your misunderstanding you are making yourself look silly.
Again, with respect, your analysis shows the limitations in your thinking
First, an opinion almost always reflects the brief. You forget that, I think
Second, your point is technically competent but you entirely miss the fact that my commentary is based on political economy
That’s not silly. That’s an analysis that quite literally seems to be beyond your wit
I have spent years being told I have got things wrong by those of a literal and legal bent. Oddly, that’s not what the evidence shows. You’re just missing the point