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On 16 February 2012, Algirdas Semeta, the European Commissioner
for taxation, appeared before the House of Lords EU Economic and
Financial Affairs and International Trade Sub-Committee to persuade
them of the merits of UK involvement with a European financial
transactions tax (FTT).
The thrust of Mr Semeta's comments was that the effect of an
FTT on economic growth would be a "negligible" 0.01
percent cut in annual growth, with approximately €57
billion being raised across the EU (€10 billion of which
would be raised for the UK Exchequer alone). In fact, he
suggested that any funds raised could contribute to growth in
Europe by leading to a reduction in other taxes or increased
investment in public services and infrastructure. This
corresponds with the general view of the European Commission which,
having revised its own initial impact assessment, now concludes
that rather than leading to a reduction in GDP, an EU-wide FTT
would actually have a positive impact on European economic
growth.
In a recent article for the Daily Telegraph newspaper, Mr Semeta
dismissed claims that an FTT would be utilised as a "backdoor
way" of increasing the EU budget, claiming instead that extra
revenue brought in by virtue of the FTT "would be offset by
reductions in national contributions".
Mr Semeta's remarks contrast strongly with those of many in
the financial services sector, in particular in the UK where the
prominence of the City of London as a financial hub means a greater
– and more vocal - interest in protecting financial
markets. The UK Chancellor, George Osborne, said that he
would veto an EU-wide tax, stating simply that "There are too
many unanswered questions". Members of the House of
Lords Sub-Committee were even more vehement in their opposition,
claiming that the tax would force business outside the EU and the
proposed extra-territoriality of the FTT would trigger
"massive trade disputes".
Mr Semeta did accept that high frequency trading would be
discouraged by an FFT, but went on to dismiss such economic
activities as "socially useless" and "high
risk". Furthermore, he discounted the possibility of
financial institutions relocating outside the EU to avoid the FTT,
pointing to the existence of well-developed infrastructure, in
particular in the City of London, and explained that any planned
implementation of an FTT would seek to minimise the risk of
relocation. Seeking to reduce the risk of relocation is, of
course, an unobjectionable aim but, as we have pointed out before
(
click here), far easier to articulate than to implement.
The efforts of the European Commissioner in attempting to
convince the UK Parliament of the merits of an FTT indicate a
reluctance by the European Commission to settle for a unilateral,
national-based system, a slimmed down version of which has been
pledged by French President Nicolas Sarkozy and is currently going
through the French Parliament. The lack of consensus however
between the EU member states has been, and is likely to continue to
be, a major stumbling block in achieving the unity required to
implement any sort of transnational tax regime. The next
instalment in this saga at EU level is likely to take place in
early March, when the European Council of Ministers meet to discuss
the FTT and enhanced co-operation in the area of tax.
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On 18 April 2013 the UK government issued a legal challenge to the decision of the EU Council of 22 January 2013 which authorised a subset of the EU (not including the UK) to introduce a financial transaction tax.
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