London Chamber of Commerce Warns on Transaction Tax
06 May 2013
Posted by: Author: Amanda Banks
Source: Amanda Banks (Tax-News.com, London)
The London Chamber of Commerce and Industry has described plans for a Financial Transaction Tax within parts the EU as potentially "particularly damaging" for London's financial services industry and for businesses that support the financial sector.
The assessment appears in a new report by the LCCI, on how businesses in London regard the value of EU membership. Eleven Eurozone countries have agreed to implement the tax, under provisions for enhanced cooperation within the EU. It explains that the tax will apply to many types of transaction in Euros involving a member state within the FTT zone, and it argues that London would be disproportionately affected "as it is a major hub for euro trading," even though the UK will not be part of the FTT zone.
Citing another recent report, produced last month by the economics consultancy London Economics for the City of London Corporation, the LCCI also warns of reduced transactions with FTT states, and that non-participating states may face increased capital and investment costs.
The report quotes the Business Development Director of a business support services company as saying that: "financial services regulations can have a big impact on our clients and therefore in the way in which they deal with us, so we will always be wary of any unintended consequences of the regulations on third parties like us."
The House of Lords European Union Committee urged Chancellor George Osborne was take "urgent legal advice" in April, in a letter that outlined the possible consequences of the FTT for the UK. The UK Government then lodged a legal challenge with the European Court, on the deadline for doing so.
The LCCI report draws attention to figures indicating that the financial services sector and related businesses contribute GBP63bn to the UK economy per year, and GBP60bn in tax revenue. In 2011, according to financial and professional services membership body TheCityUK, the industry generated a trade surplus of GBP47bn, 38% of which was derived from the EU market.
According to the report, 52% of 130 London businesses polled believe that the UK remaining in the EU under current condictions would be harmful to their economic prospects. However, 60% thought that the transfer of some powers back to the UK would be good for business.