Transaction Tax Bad: TheCityUK

Speed read: Financial transaction tax is bad for savers, bad for business and bad for the European economy.

The Government was right to bring a case to the European Court of Justice on the proposed Financial Transaction Tax (FTT) given the consequences of its introduction for the UK’s economy, according to TheCityUK, the independent, cross-sector voice for UK-based financial and related professional services and champions the international competitiveness of the industry. Today’s ruling from the European Court of Justice enables the UK to restate its case at a later date, it says, arguing that it is better to have pressed the case early than to have missed the opportunity for a legal challenge by delaying the action.

It adds that the case provided an opportunity to highlight the implications for Europe’s economy and highlight the importance of maintaining a level playing field for all EU member states, in or outside of the Eurozone.  Independent research has shown the detrimental impact the FTT would have on Europe’s economy and in particular the £3.6bn detriment to household savings in the UK. It will have a particularly adverse effect on London as Europe’s financial centre.

Whilst TheCityUK respects the rights of Member States that have chosen to adopt the FTT, they in turn must respect the rights of Member States that have chosen not to. 

The extraterritorial reach of the FTT will have a significant impact on firms and individuals conducting business in countries that have chosen not to participate in this initiative - it would apply to a branch of a British institution in Hong Kong trading a Greek corporate bond with an American bank.     

Chris Cummings, Chief Executive of TheCityUK, said:
“The ECJ’s legal judgement focuses on the enhanced co-operation procedure.  But what is really at stake here is the right of non-participating Member States to promote economic growth in their own markets. 

“The Commission’s own impact assessment has shown that the FTT is bad for savers and bad for investors.  It is the exact opposite of the type of intervention that is needed at the moment if the European economy is to be stimulated and if we are to show international markets that Europe is open for business. It will have a particularly adverse effect on London as Europe’s financial centre.

“The impact of FTT will be to make the EU less attractive to international institutions, risking international financial services companies to relocate elsewhere, damaging the EU’s economic recovery and long-term growth.”

 

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