U.K. Chancellor of the Exchequer George Osborne said a European Union plan to tax financial transactions with ties to participating nations is “unlawfully extraterritorial” and would hinder growth in the region.
Responding to a May 21 letter by European financial-services lobby groups expressing their concerns about the proposed levy, Osborne called for the plan to be limited in its scope.
“If this FTT is to proceed, then I believe it should be significantly scaled back, with the objective of growth central to the thinking of policy makers in any redesign,” he said in the letter, published by the Treasury in London yesterday. “The U.K. stands ready to support in these discussions.” The plan is “poorly designed” and “badly timed,” he said.
Britain began a legal challenge in April at the European Court of Justice in Luxembourg to protect itself from the plan, which would charge a 0.1 percent rate on stock and bond trades and 0.01 percent on derivatives transactions, the same as a previously failed proposal for all 27 EU countries. The tax could be collected worldwide as soon as the start of next year by the 11 EU nations that have so far signed up to talks.
The U.K. “strongly” objects to the “deemed establishment basis of the tax which will penalize financial institutions in non-participating member states and designate investors from those countries as established in the FTT zone by virtue of who their trading counterparty is,” Osborne said in the letter.
The EU estimates the tax could raise 30 billion euros ($39 billion) to 35 billion euros a year. To become law, it has to be approved by the participating nations. The 11 countries that have signed up to discuss the plan are Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia. All 27 EU nations can sit in on the talks and have the option to join.