Europe: Transaction tax illegal, EU advised
16 September 2013
Posted by: Author: Huw Jones (Business Report)
Author: Huw Jones (Business Report)
A plan to tax financial transactions in 11 EU member states from 2014 is illegal, according to the bloc’s lawyers, dealing what could be a final blow to the measure as proposed.
The findings are not binding but will make it harder to introduce a measure to make banks pay governments about e35 billion (R463bn) a year.
The legal opinion will be put to EU finance ministers, who must decide whether to scrap the idea or choose a simpler levy – such as the stamp duty Britain imposes on shares. It is not clear when the ministers will discuss the findings.
Britain, the EU’s biggest financial centre, and several other states, have opposed the transaction tax proposal, raising questions about how it would work with only some members participating.
Germany, France, Italy, Spain, Austria, Portugal, Belgium, Estonia, Greece, Slovakia and Slovenia were planning to adopt the tax on stocks, bonds, derivatives, repurchase agreements and securities lending.
Germany has been one of the main backers of the tax as a way of reducing ultra-fast, high-frequency trading. As Europe’s largest economy, it was also unhappy at being a major contributor to bank bailouts arising from the financial crisis of 2007 to 2009.
But the legal services for EU member states said in their opinion dated September 6 that the tax plan "exceeds member states’ jurisdiction for taxation under the norms of international customary law”.
The document said the plan was not compatible with the EU treaty "as it infringes upon the taxing competences of non-participating member states”.
A transaction tax in only some member states would be "discriminatory and likely to lead to distortion of competition to the detriment of non-participating member states”.
The tax would also be an "obstacle” to the free movement of capital and services within the single market, breaching two tenets of the EU’s founding treaty.