Tobin Tax would hurt UK's financial centre

INTRODUCING a Tobin Tax would damage the UK and Europe as financial centres, warn business experts.

A Franco-German joint proposal for a Europe-wide tax on financial transactions, announced yesterday by Angela Merkel, would merely divert business into other areas.

"At a practical level, I would be very surprised if the UK agreed to such a tax given the obvious adverse impact on the UK as a financial centre," said PwC tax partner Matthew Barling.

A transaction tax would also be difficult and costly to administer, Barling added.

Ben Jones, an associate in Eversheds' tax group, said: "Unless such measures are introduced globally, if the tax imposed is high enough or the associated compliance burdens significant, businesses will look to move their affected operations to financial centres outside of the scope of such tax."

Business representatives warned that the tax would stifle growth, and hit savers.

"Policymakers need to understand that these taxes are not paid by banks and other intermediaries. Just like stamp duty in the UK, they are a direct charge on people's savings," said Richard Saunders, chief executive of the Investment Management Association.

Dr Neil Bentley, CBI deputy director-general, said: "To consider the introduction of a financial transaction tax at a time when we should be totally focused on promoting growth is a mistake. Such a tax could have the opposite effect, increasing the cost of capital for businesses and holding back their growth potential."

A transaction tax would also be difficult and costly to administer, Barling added.