EU's own lawyers say the proposed EU "Tobin Tax" is illegal
A 14-page legal opinion suggests that the proposed "Financial Transactions Tax" (FTT) to be introduced by eleven EU member states is unlawful in that it would exceed member states' tax
powers and is also incompatible with the EU treaty.
The FTT, also known as the Robin Hood tax and Tobin tax, is set to be adopted by Germany, France, Italy, Spain, Belgium, Austria, Portugal, Greece, Slovenia, Slovakia and Estonia.
A number of other states, including the UK, are strongly opposed to the plan.
According to press reports the legal document drawn up by the EU Council legal services says the transaction tax plan "exceeds member states' jurisdiction for taxation under the norms of international customary law."
and that the proposal
"infringes upon the taxing competences of non-participating member states,"
making it incompatible with the EU treaty. Also, because only 11 EU members are signed up, this would make the tax
"discriminatory and likely to lead to distortion of competition to the detriment of non participating member states."
BBC World Service economics correspondent Andrew Walker says the countries concerned can press ahead, as this is just a non-binding legal opinion, but it is a warning that they would risk losing if it were to end up in court.
"This legal opinion is a very serious setback for the 11 countries' plans," he said.
British government ministers fear the tax could be imposed on British firms trading with businesses based in one of those states. In April, Britain launched a legal challenge to the plans in the European Court of Justice.
The City of London could be hit by the tax if, for example, a British firm trades with branches of French or German banks based in the capital.
The British government would have to collect the tax, but would not be allowed to keep it.
Business lobby groups are concerned that British companies trading with the UK branches of French or German banks could be hit by the tax.
In response to the EU lawyers' opinion, the CBI's head of financial services and corporate governance, Leo Ringer, said:
"This opinion recognises that the FTT would have damaging implications for growth, jobs and investment beyond the member states involved, so now is the time to draw a line under this flawed proposal.
"It also makes clear that moves towards further integration between a number of EU countries can't be taken forward if they impact on the rights of all member states, unless all states affected have signed up."
A bunch of economic illiterates calling themselves "The Robin Hood Tax campaign group" said the UK's legal move was about "defending one rather rich square mile".
Presumably these toytown trots either do not realise, or don't care, the extent to which the earnings of that one square mile kept much of the rest of the UK economy afloat during the recent recessions.
It's fashionable to despise bankers - and heaven knows there are some bankers who have a lot to answer for. That does not alter the fact that if we were stupid enough to drive large chunks of the City of London's business to New York, Zurich, Singapore or Tokyo, which is precisely what idiotic measures like the unilateral adoption by the EU of punitive taxes on banking might do, then bankers would not be the only people in the UK who would suffer.
A serious loss of income, such as Britain would experience if a transactions tax drove a significant part of the City of London's income to financial centres in other countries outside the EU where the the tax did not apply would hit ordinary British people as well as "fat cats."
It would mean that ordinary British working men and women would lose their jobs. It would mean less taxes to pay for schools and hospitals. It would mean even more cuts in welfare. It would mean that the "Squeezed Middle" would be squeezed even harder.
I hope this opinion drives the EU countries which are part of the proposed FTT to think again.
The FTT, also known as the Robin Hood tax and Tobin tax, is set to be adopted by Germany, France, Italy, Spain, Belgium, Austria, Portugal, Greece, Slovenia, Slovakia and Estonia.
A number of other states, including the UK, are strongly opposed to the plan.
According to press reports the legal document drawn up by the EU Council legal services says the transaction tax plan "exceeds member states' jurisdiction for taxation under the norms of international customary law."
and that the proposal
"infringes upon the taxing competences of non-participating member states,"
making it incompatible with the EU treaty. Also, because only 11 EU members are signed up, this would make the tax
"discriminatory and likely to lead to distortion of competition to the detriment of non participating member states."
BBC World Service economics correspondent Andrew Walker says the countries concerned can press ahead, as this is just a non-binding legal opinion, but it is a warning that they would risk losing if it were to end up in court.
"This legal opinion is a very serious setback for the 11 countries' plans," he said.
British government ministers fear the tax could be imposed on British firms trading with businesses based in one of those states. In April, Britain launched a legal challenge to the plans in the European Court of Justice.
The City of London could be hit by the tax if, for example, a British firm trades with branches of French or German banks based in the capital.
The British government would have to collect the tax, but would not be allowed to keep it.
Business lobby groups are concerned that British companies trading with the UK branches of French or German banks could be hit by the tax.
In response to the EU lawyers' opinion, the CBI's head of financial services and corporate governance, Leo Ringer, said:
"This opinion recognises that the FTT would have damaging implications for growth, jobs and investment beyond the member states involved, so now is the time to draw a line under this flawed proposal.
"It also makes clear that moves towards further integration between a number of EU countries can't be taken forward if they impact on the rights of all member states, unless all states affected have signed up."
A bunch of economic illiterates calling themselves "The Robin Hood Tax campaign group" said the UK's legal move was about "defending one rather rich square mile".
Presumably these toytown trots either do not realise, or don't care, the extent to which the earnings of that one square mile kept much of the rest of the UK economy afloat during the recent recessions.
It's fashionable to despise bankers - and heaven knows there are some bankers who have a lot to answer for. That does not alter the fact that if we were stupid enough to drive large chunks of the City of London's business to New York, Zurich, Singapore or Tokyo, which is precisely what idiotic measures like the unilateral adoption by the EU of punitive taxes on banking might do, then bankers would not be the only people in the UK who would suffer.
A serious loss of income, such as Britain would experience if a transactions tax drove a significant part of the City of London's income to financial centres in other countries outside the EU where the the tax did not apply would hit ordinary British people as well as "fat cats."
It would mean that ordinary British working men and women would lose their jobs. It would mean less taxes to pay for schools and hospitals. It would mean even more cuts in welfare. It would mean that the "Squeezed Middle" would be squeezed even harder.
I hope this opinion drives the EU countries which are part of the proposed FTT to think again.
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