EU finance ministers have green-lighted the new tax on financial transactions for 11 eurozone countries, prompting calls for policymakers to ensure it does not negatively impact the UK.
Previous attempts to introduce the financial transactions tax across all 17 members of the currency or the 27 EU countries failed. The UK and 14 other EU members will not have to introduce the tax while Germany and France are among those bringing it in.
Today’s approval will allow the 11 participants proceed with the FTT under “enhanced cooperation” rules, which permit the smaller group to move ahead with the tax. The FTT, expected to be charged at a rate of 0.1% of the value of any trade in shares or bonds and 0.01% of any financial derivative contract, is designed to discourage speculative trading.
European Commissioner for tax Algirdas Semeta says: “There is everything to gain from being part of an EU approach to the financial transactions tax.
“The considerable new revenues it will generate can be used for growth-friendly investment and to support wider policy commitments such as development. Taxation will become fairer, as the financial sector makes a proper contribution to public finances and the costs of the crisis.”
Spain, Portugal, Italy, Belgium, Austria, Slovakia, Slovenia, Greece and Estonia are the other eurozone members progressing with the FTT. The UK rejected the tax after arguing that London, as the region’s largest trading hub, would be excessively harmed and could lose its status as a global financial centre.
In the UK, the Confederation of British Industry is one of the group’s applauding the Government’s decision to oppose the FTT’s implementation.
CBI director for competitive markets Matthew Fell says: “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.
“As the UK’s largest single trading partner, a healthy European economy is in everyone’s interests so we urge participating member states to reconsider this tax.”
Writing earlier this month on Fundweb, BDO’s Angela Foyle argued that the UK could benefit from not implementing the FTT, as some businesses may choose to relocate to these shores to avoid falling under the tax’s remit.
Foyle also cited cited the example of Sweden, which witnessed a “dramatic” fall in market liquidity and increased volatility after a similar tax was introduced between 1984 and 1991.