In its report, Financial Transaction Tax: Alive and Deadly, the Lords EU Sub-committee on Economic and Financial Affairs claims the tax in its current form could stand to “damage to our markets but [deliver] no benefit to the Exchequer.”
Originally intended to be adopted by all 28 member states, the tax is being taken forward by just 11: Austria, Belgium, Estonia, Greece, Italy, Portugal, Slovakia, Slovenia, Spain, France and Germany.
The committee is sceptical about the commission’s claim that the tax would generate revenues of €31bn per annum, and says it is “very unlikely that the proceeds could be used as a revenue stream for the EU budget” given that only 11 member states are involved.
Committee chairman Lord Harrison said: “The committee is still firmly of its original view that an EU financial transaction tax is flawed and potentially damaging to the economic well-being of the UK.
“What we now have before us is a proposal to allow a breakaway group of EU countries to proceed with their own FTT, which would have a serious negative impact on the UK and other non-participants.”
The committee argues that the authorised use of “enchanced cooperation” fails to meet the requirements of EU law.
To ensure payment of the tax, each financial institution would be jointly and severally liable to pay, meaning that the UK could be required to collect the tax on behalf of other member states, such as Germany and France.
Under the proposals, shares and bonds trades would be taxed at 0.1% and derivatives at 0.01%.
The government is accused of having been slow to act, particularly given its decision to abstain from a vote authorising the use of enhanced cooperation in January.
“It was only after constant and repeated warnings on our part that the government finally awoke to the serious threat to the UK’s, and the broader EU’s, interests that an FTT pursued by other member states might present.
“We welcome the steps that the government have now taken to launch a legal challenge against this exercise of enhanced cooperation”, said the report.
The UK government took a legal challenge to the European Court of Justice in April in a bid to annul the decision.
