Banking and finance

Financial transaction tax in Europe in 2025

The EU Financial Transaction Tax (FTT) is a proposed tax that would apply to certain financial transactions. In this article, we will review in detail why this tax idea arose, the type of transactions it targets, what is its current state of implementation in Europe as well as other important details.

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Currently, the FTT has not been implemented at the European Union level, despite the efforts and discussions that have taken place over the years, an agreement for its implementation has not been reached.

Overview of Financial Transaction Tax in Europe

The EU Financial Transaction Tax (FTT) is a proposed levy that would apply to certain financial transactions such as the purchase and sale of shares, bonds and derivatives, with rates varying between 0.1% and 0.3% of the transaction value.

Since the idea of this type of tax was first introduced in Europe, no agreement has been reached on its uniform implementation throughout the European Union. Some countries nevertheless have begun to adopt a tax of this type independently.

Among the purposes or reasons that gave rise to the debate on the implementation of such a levy in Europe are the following:

Response to the 2008 financial crisis

The 2008 financial crisis highlighted the instability of the financial sector and generated a desire for greater regulation. In addition, given that the financial sector had received significant public bailouts, there was a desire to make the financial sector contribute more to the costs of the crisis.

Revenue generation

This type of tax was seen as a potential source of significant revenue for European governments and it was estimated that it could generate tens of billions of euros annually. It was considered that revenues could be used to finance common EU projects or to address global challenges such as climate change and aid to developing countries.

Tax harmonization

It was sought to avoid fragmentation of the internal market as a result of different national approaches to the taxation of financial transactions. A financial transaction tax at the European level could prevent capital flight between countries with different tax regimes.

Tax fairness

The aim was to ensure a substantial and equitable contribution of the financial sector to public finances. Some stakeholders saw the financial sector as under-taxed compared to other economic sectors and saw the FTT as a way to make the financial sector pay its fair share.

Stabilization of financial markets

To discourage any financial transactions that do not contribute to the efficiency of financial markets or real economies. It was thought that such a tax could discourage excessive speculation, promote more long-term investments and reduce market volatility.

Historical background

As we have seen, the financial crisis of 2008 highlighted the instability of the financial sector, generated a desire for more regulation and gave way to initiatives such as the FTT in 2011. We will now look at the evolution of this initiative through a timeline to have a better understanding of the origin, evolution and current status of this proposal.

2011, initial proposal by the European Commission

The European community proposes an EU-wide FTT with the aim of generating revenue and regulating financial markets. A rate of 0.1% is suggested for stocks and bonds, and 0.01% for derivatives.

2012, lack of unanimous agreement

The necessary consensus among the 27 member states to implement the FTT at the EU level is not achieved. Some countries strongly oppose arguing possible negative effects on their financial sectors.

End 2012-2013, start of enhanced cooperation

At the end of September 2012, eleven member states (Austria, Belgium, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia, Spain, France, Italy and Spain) agreed to work on a coordinated implementation of the FTT.

2014-2015, negotiations and disagreements

Differences on the scope and implementation of the tax between the participating countries are pressing, and issues such as what types of transactions should be included and how to avoid the offshoring of financial activities are also being debated.

December 2015

Estonia announced that it no longer supported the financial transaction tax due to concerns that the latest revised version of the tax hardly generated any revenue while scaring away traders.

December 2018, Franco-German proposal

France and Germany presented a more concrete proposal to break the deadlock in the negotiations by drawing inspiration from the FTT implemented in France in 2012. They proposed to tax only transactions in shares of large companies leaving out bonds and derivatives to reduce complexity.

2019, new momentum in negotiations

Participating countries agreed to intensify efforts to reach an agreement on the FTT, however, differences persisted, with some countries expressing concerns about possible side effects, such as capital flight and the impact on the competitiveness of European financial markets.

2020-2024, slow progress

From 2020 onwards, negotiations slowed down considerably due initially to the COVID-19 pandemic and then to other economic challenges that diverted attention to other priorities. In the meantime, some countries decided to implement national versions of the FTT such as Spain, which did so in 2021. In 2024 there is still no consensus on a multinational implementation of the tax and the process still faces divisions over its scope and design. EU Fianial Tax - KPMG International

Taxable amount and rates of FTT in Europe

The scope of the EU Financial Transaction Tax has evolved significantly from its initial conception to the most recent proposals. The initial scope of proposal made in 2011 covered:

Stocks and bonds with a 0.1% rate on these transactions.
Derivatives with a rate of 0.01% on the nominal value of the contracts.

Currently, however, the scope of this tax has been considerably reduced due to multiple factors, which we have mentioned above such as implementation difficulties and the different views of the involved nations. The latest proposal aims to tax only share transactions of large companies, with a market capitalization of more than 1 billion euros, whose registered office is located in at least one participating member state. The latest proposal excludes bonds and derivatives.

Tax rates on FTT in different European countries in 2024

Although the financial transaction tax has not been approved for EU-wide application, some countries have decided to introduce similar taxes with rates that vary from country to country. The table below shows the European countries that apply similar taxes and the corresponding rates.

Country	Tax rate
Belgium	0.12% – 1.32%
Finland	1.6% – 2.0%
France	0.01% – 0.30%
Ireland	1%
Italy	0.02% – 0.20%
Poland	1%
Spain	0.20%
Switzerland	0.15% – 0.30%
Turkey	0.0% – 1.0%
United Kingdom	0.5% – 1.5%

The EU Financial Transaction Tax is an ambitious project that has evolved significantly since its initial conception in 2011 from a broad proposal covering multiple financial instruments to a more narrow concept focused mainly on large corporate equity transactions.

This is because over more than a decade of negotiations, the process has faced a myriad of challenges due to the complexity of harmonizing tax policies in such a diverse economic environment.

The future of the FTT in Europe remains uncertain, but the lengthy negotiation process has taught valuable lessons about the complexity of tax and financial integration in the EU and has led some nations to implement similar taxes independently.