The new law approved by the Belgian Parliament on November 19 that introduces a tax on the exchange of foreign currency, bank notes, and coins was published in the Belgian State Gazette of December 24, 2004.
Belgium is the first country to adopt legislation to levy a tax on any currency exchange transactions that take place within its borders. The law will only enter into force when all member states of the European Economic and Monetary Union have adopted a similar tax on currency exchange transactions, or when it is made mandatory by a European regulation or directive.
The Tobin tax is a two-tier tax rate, as proposed by Professor Paul-Berndt Spahn. Ordinarily tax is levied at a rate of 0.02 percent of the gross amount of any currency exchange transaction, but speculative transactions will be subject to a higher tax rate to be determined by the EU Council of Economic and Finance Ministers under article 59 of the EC Treaty (with a maximum of 80 percent). Speculative transactions are any currency exchange transactions that are outside the fluctuation margin of a central rate to be determined by Royal Decree in relation to a progressive mean rate calculated over 20 days.(Read the article …)
Article 344, section 1 allows tax authorities to disregard the legal qualification, or structure, of a transaction if they can prove the parties have chosen that particular legal structure solely to avoid income tax. If that can be established, tax authorities can reclassify the transaction and assess the applicable tax. However, tax authorities must accept the original legal qualification if the taxpayers can prove it meets lawful financial or economic requirements.
The general antiavoidance rule also may be used when tax authorities can prove that parties have divided a single transaction into separate steps to create a certain income tax outcome. Tax authorities can disregard the separate steps and treat them as one operation (step transaction doctrine). (Read the article …)
The Belgian parliament has approved a law introducing a tax on the exchange of foreign currency, bank notes, and coins. The Chamber of Representatives adopted the bill on July 15, and the Senate has not used its right to review it. The bill should be signed by King Albert II and published in the official gazette within a few weeks. Belgium will be the first country to introduce a Tobin tax, although under article 13, paragraph 3 of the law, the tax cannot enter into force until all member states of the European Economic and Monetary Union adopt similar legislation.
The Tobin tax is named for James Tobin (1918-2002), an economics professor who was awarded the Nobel Prize in 1981 for his analysis of financial markets and their relationship to government spending decisions, employment, production, and prices. He launched his proposal for a tax on foreign exchange transactions in 1972, with the goal of increasing the independence of monetary policy and reducing nominal exchange-rate volatility when capital flows freely across international borders. (More …)