EU rejects UK’s challenge on Financial Transaction Tax
The European Court of Justice has rejected the United Kingdom’s opposition to the Financial Transaction Tax (FTT), claiming the final details of the tax are not yet complete, and the UK’s challenge is merely ‘premature’.
Also known as the ‘Robin Hood’ or Tobin Tax, following its introduction by American economist James Tobin back in 1972, the aim of this highly controversial tax is to raise public funds by taxing shares, currencies and bonds’ transactions.
I am in complete support of the British Government’s rejection of this tax, as I predict it will lead to a fall in investment activity; encourage unemployment and result in a drop in GDP. Just as the economy is starting to experience real growth again, this damaging Tobin Tax, described as “barmy” by London Mayor, Boris Johnson, could put people’s livelihoods in real jeopardy, drive much-needed business out of the EU and will certainly not provide the financial solutions Europe is searching for.
Figures released earlier this year forecast a € 204.9 billion asset value deficit in Italy and € 150.6 billion in Germany following the implementation of the FTT, and even if the UK doesn’t sign up, the effects will have a negative bearing on investors and savers. There are ‘extra-territorial’ measures in place at the moment which would mean the Treasury would be responsible for taxing transactions in the City on behalf of EU countries upholding FTT, which could prove costly when it comes to the UK’s competitive stance on the continent. If a UK-based business trades with branches of Italian or French banks in London for example, then they could be hit by the tax. So far, 11 EU countries are going ahead with the tax, namely Germany, France, Italy, Spain, Belgium, Austria, Portugal, Greece, Slovenia, Slovakia and Estonia.
So why was the UK’s challenge of the FTT rejected by EU judges?
Until it comes into effect, the United Kingdom is, in effect, rejecting prospective elements of the tax, and according to a statement issued by the EU court, ‘the arguments must be rejected and the action dismissed’ as a result.
It is therefore imperative that the government steps in at a later date when the definitive proposal of the tax is complete, as if the final ruling is still not in national interest, the UK’s rejection of FTT will carry more weight.
To my mind, the Financial Transaction Tax is not the answer to Europe’s economic problems. Instead of focusing on sound economic policy, the FTT would adversely affect the economy at a time when growth is very much top of Europe’s agenda.