The European Association of CCP Clearing Houses (EACH), the European Central Securities Depositories Association (ECSDA) and the Federation of European Securities Exchanges (FESE) co-signed a letter in response to the OECD consultation on Pillar 1 Blueprint. The purpose of the letter is to provide supplementary information relevant to the position set out in our previous correspondence with the OECD on the 22 October 2019 and restate why we believe that Trading Venues (TVs), Central Counter Parties (CCPs) and Central Securities Depositories (CSDs) should be specifically excluded from the payment of a taxing right for market jurisdictions over a share of residual profit calculated a MNE (multinational enterprise) group (or segment) level (“Amount A”).
The key points expressed in the joint letter are the following:
- Competitive distortion risk – An exception for the Financial Services business limited to the “banking, insurance and asset managers sectors” is bound to create competitive distortions across the sector, without sufficient justification for the rest of the Financial Services business to be included in the scope of the new taxing right based on the type of activities carried out.
- Consumer Facing Businesses (CFB) – The legislations that TVs, CCPs and CSDs are subject to impose strict requirements on the profile of participants that can be accepted by the market infrastructures, which very often excludes de facto natural persons. Therefore, the trading, clearing and settlement landscape is subject to robust non-tax regulations consistent with recognised industry standards. Due regard should be given to the constraints those regulations impose upon them and the potential unintended effects that Pillar One might have.
- Automated Digital Services (ADS) – The purpose of the digital transition performed by Trading Venues, CCPs and CSDs over the last 50 years was primarily aiming at reducing risk, enhancing standardisation and increasing efficiency for market participants. However, human intervention remains a critical feature throughout the lifecycle of a security, when issued, transacted, settled or held in custody (e.g. order confirmation, corporate action processing, reconciliation, etc.). For these reasons, market infrastructures should not generally involve business defined in the positive list of ADS business, for the purposes of the new taxing right.
Joint EACH/ECSDA/FESE letter to OECD on its consultation on PIllar 1 Blueprint
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