Review of current practices for taxation of financial instruments, profits and remuneration of the financial sector

The present document is the study on the review of current practices for taxation of financial instruments, profits and remuneration of the financial sector (below the "Study"). The economic and financial crisis has triggered political discussions on the taxation of the Financial Sector and whether there is a need to adapt tax systems to make the Financial Sector contribute in a fair and substantial way to public budgets. On 7 October 2010, The European Commission presented its communication on "Taxation of the Financial Sector (COM(2010)549 final)" and its accompanying Staff Working Document SEC(2010)1166, which assesses the Financial Transaction Tax and the Financial Activity Tax. There have been debates in the Council, in the European Parliament, in the Economic and Social Committee, in the G-20, and in the Member States on the issue. These debates have shown diverging opinions between countries and between political and social groups, notably and foremost on the feasibility and efficiency of specific instruments, especially if implemented at the European level only. One key issue in the debate is to what extent current tax provisions directed at financial instruments or the Financial Sector differ across countries and/ or differ from tax provisions in other sectors within countries. There is therefore a need for a comprehensive overview of current tax practices with regard to Financial Sector taxation in order to understand better the current taxation of the Financial Sector in the EU. To this end, the Commission has instructed PwC to provide a review of the current tax provisions directed at the Financial Sector and financial instruments. The content of the Study is limited to the questions raised by the Commission in the questionnaires provided and is subject to certain limitations in terms of scoping as agreed by the Commission and detailed below in introduction of the respective Chapters. The Study covers 4 different Chapters, namely: Corporate Taxation of the Financial Sector - Banks, Value-Added Taxation of the Financial Sector, Labour Taxation in the Financial Sector, Taxation of Financial Instruments. The scope of this Study is to review current tax provisions directed at the Financial Sector in the 27 Member States as well as - for comparison purposes - certain key third countries: China, Singapore, Switzerland and the USA. The reference tax year is 2011.