EU FTT Collection€¦ · with EU FTT collection, in view of the potential central functions that may be envisaged: e.g. back-up data, reporting, determining liability, … Cost and

EU FTT CollectionPotential collection models

Joint EBF-FBF Tax Conference 2014 - Paris, 22 September 2014

Assessing potential EU FFT collection models

From self-assessment to a central collection functionality

Self-assessment involves liable parties to report chargeable transactions and remit any FTT due to the relevant tax authorities

A centralized collection functionality generally involves a (I)CSD or a new utility collecting the FTT on behalf of its members/participants (who may be acting for their own account or for third parties)

Broadly the functionality of a central collection mechanism may either be

Limited: requires users to flag instructions or use different accounts according to the applicable EU FTT treatment (incl. remittance country, exemption flags, applicable rate, etc. ). Chargeability is determined at the broker/dealer or the investor’s custodian level and the logic to be built centrally would only have to be able to read the flags and not obtain and interpret the full transaction data; or

Expanded: based on centralizing all (or several) data required to determine FTT liability and to contain (and run) a central FTT logic on those data to determine FTT liability centrally, with (data regarding) every chargeable transfer to be sent to a central system.


Assessing potential EU FFT collection models

Design objectives and challenges

1. Determining FTT Liability Is transaction subject to FTT? Who is liable for the payment of the FTT?

2. Collection and Remittance of FTT Who is responsible for the collection and the remittance of the tax Who will bear the cost of FTT collection?

3. Enforceability and audit Who will be responsible for enforcing the FTT? How will be FTT be enforced in the different markets and in countries outside the FTT zone? What are the applicable reporting requirements? Who will be responsible for auditing FTT compliance? What are the sanctions for non-compliance?

4. Cost of implementation and operation must be reasonable To what extent can existing reporting requirements be re-used? Is STP possible?




Key challenges and questions

Limited central functionality vs. mere self-assessment

What are the benefits (of an approach with limited central functionality) compared to a mere self-assessment collection model?

Which added value does a central collection model with a limited functionality offer above a separate calculation at broker level (mere self-assessment)?

Which role could delegation (of collection responsibility) play in this respect?

Impact of collection on liability?

Limited vs. expanded central functionality (degree of central functionality + associated costs)

What specific benefits (or disadvantages) do market participants see in a more expanded role of the central collection approach in connection with EU FTT collection, in view of the potential central functions that may be envisaged: e.g. back-up data, reporting, determining liability, …

Cost and benefits of required FTT data upstream for information and auditability purposes, i.e. the tax authority perspective, and for determining liability? Cost of building a full EU FTT logic?

Need to develop separate functionality for reporting gross transactions that are otherwise not visible to the FTT collector?

Linking trading counterparties


Key challenges and questions

Who is to perform (operate) central collection functions?

Who can operate such a central system? An existing or a new utility? Can we re-use the CSD (is this a relevant argument or is it more like a constraint (what in case of no membership? What if fees to high?) Can CCPs perform FTT collection functions? Should global custodians be offered the option to collect FTT?

How/where to capture OTC and intra-group transactions?

If one opts for a new utility, what fee structure could such new utility use? Assessing the suitability of an expanded centralized collection approach, do market participants believe data centralization is a too costly option?

Centralised collection functionality & the need for clear rules on primary liability/rules capable of automatic processing

Are the challenges regarding clear rules (and rules capable of automatic processing) impacted by the centralized collection approach chosen?

Would an expanded centralised collection approach would solve the unclear rules issue (given that the use of a centrally developed FTT logic)?

Are the rules (such as the lack of economic link exception) proper for automatic processing at collection level?



Documents

EU FTT Collection€¦ · with EU FTT collection, in view of the potential central functions that may be envisaged: e.g. back-up data, reporting, determining liability, … Cost and