The European Commission has given the green light to 11 member countries, including Germany and France, to go ahead with a planned Financial Transaction tax, a controversial move over which some business leaders have concerns.
In a statement, the EU Commission said a group of countries representing about two thirds of the European Union’s GDP will, “for the first time ever”, be able to apply this tax at a regional level “answering the long-time calls of their citizens”.
The UK is one of 15 countries which will not be implementing the Financial Transactions tax.
Announcing the agreement, Algirdas Šemeta commissioner responsible for tax at the EC, also urged other countries to sign up for the Financial Transaction tax and commended those who had.
“Today is a milestone in global tax history... there is everything to gain from being part of an EU approach to the financial transactions tax,” said Šemeta.
“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.”
Šemeta added that the single market will be strengthened “as a patchwork of national approaches is replaced with one harmonised FTT”.
Angela Foyle, tax partner at BDO, questioned whether this would in fact create the harmony Šemeta describes.
“I can’t see the UK changing its stance, unless the rest of the world also implements the tax. The current agreement could reduce liquidity in the markets and adversely affect the wider economy, as international businesses will find it more expensive to do normal business hedging transactions.
“When a similar tax was imposed on Sweden in the eighties, there was a reduction in home market liquidity and increased volatility as a result, will we see a similar problem unfold with the current tax?
“Should the 11 member states decide not to adopt a ‘pan-EU model’ and instead tailor the proposal to their country-specific needs, both the complexity and the cost of compliance and for all parties involved will increase. This FTT might well be raising more revenue, but at what cost?”