UNCERTAINTY and anti-competitiveness could loom in Europe after 11 nations agreed to move forward with looking at a financial transaction tax (FTT).
Also known as a ‘Tobin Tax’, the levy would fall on financial transactions in a bid to make the financial services industry pay its way. The EC’s Ecofin Council adopted a decision by 11 member states to go ahead with ‘enhanced cooperation’ on an FTT.
“… It was about moving the financial transaction tax forward through enhanced cooperation, but it was not about the content or the substance of any financial transaction tax ,” said Ireland’s finance minister Michael Noonan after the meeting.
But, with the UK against the plans, business representatives have warned against its further progress, claiming that adoption by just some countries would create confusion among the financial services industry, and destroy its competitiveness against other nations and regions.
Matthew Fell, CBI director for competitive markets, said: “The UK government is right to reject a financial transaction tax as damaging for jobs and growth.
“It is disappointing that eurozone economies are pursuing the FTT, whose costs ultimately fall on consumers and businesses, and will be a drag on the eurozone recovery.
“This tax must not impinge on non-participating member states by including extra-territorial reach into financial services activity conducted in the UK.”
Taxand chairman Frédéric Donnedieu de Vabres said the plan has from a lack of clarity about how the FTT would be formed and would create a “trading dichotomy across Europe”, which could benefit the UK.
“As things stand, financial hubs such as Frankfurt, Paris and Madrid will be affected by the tax, with other centres of trading, including London, seemingly gaining a significant advantage through their resilience in not signing up to the agreement,” he said.
“What is clear is that implementation, in whatever form it finally takes, could have serious consequences for the overall competitiveness of Europe as a global hub for financial services. The lack of consistency in the taxation of trading could lead multinationals to avoid the continent altogether, instead looking to the US or Asia.”
The EC’s original proposal involved a harmonised minimum 0.1% tax rate for transactions in all types of financial instruments except derivatives (0.01% rate). The aim was for the financial services to make a fair contribution to tax revenues and discouraging transactions that do not enhance the efficiency of financial markets.
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The EC has been instructed to draft a European Union (EU) directive authorising an EU financial transaction tax, which would apply to ten of the EU’s 28 member states