Financial transaction tax illegal, warn lawyers
A financial transaction tax imposed across 11 EU countries would contravene the EU treaty, lawyers from the bloc conclude
THE IMPOSITION of a financial transaction tax (FTT) across 11 EU nations would be illegal, according to lawyers from the countries.
The proposals will see a 0.1% tax on the value of stocks or bonds and 0.01% on derivative contracts and is poised to be introduced across 11 EU countries including France, Germany, Italy and Spain, with the intention of curbing risk-taking, the Financial Times reports.
In a 14-page legal opinion, the lawyers said the measure would exceed the member states’ tax powers, adding such a move “infringes upon the taxing competences of non-participating member states”, making it incompatible with the EU treaty.
The fact that its introduction would not be EU-wide – the UK and Sweden in particular are staunchly opposed – means the move would be “discriminatory and likely to lead to distortion of competition to the detriment of non-participating member states”, the document from the EU Council Legal Service said.
As the assessment is not legally binding, the countries concerned are free to press ahead, but it serves as a warning that, should it come to court, it would in all likelihood be defeated.
Concerns have been raised previously, with a memo from civil servants of the participating nations leaked to think tank Open Europe raising a litany of questions over how the collection of revenues would work in practice, and warning the tax would introduce additional and unsustainable costs for participants in the bonds market.
More recently, the International Securities Lending Association (ISLA) claimed the proposed levy will eradicate 65% of lending activity in Europe, slashing the €3bn (£2.6bn) annual windfall revenues earned by long-term asset owners including pension funds and mutual funds by more than €2bn.
The CBI’s head of financial services and corporate Leo Ringer said: “This opinion recognises that the FTT would have damaging implications for growth, jobs and investment beyond the member states involved, so now is the time to draw a line under this flawed proposal.
“It also makes clear that moves towards further integration between a number of EU countries can’t be taken forward if they impact on the rights of all member states, unless all states affected have signed up.”