TheCityUK comments on Today’s Ruling on the FTT:
The Government was right to bring a case to the European Court of Justice on the proposed Financial Transaction Tax (FTT) given the consequences of its introduction for the UK’s economy. Today’s ruling from the European Court of Justice enables the UK to restate its case at a later date. It is better to have pressed the case early than to have missed the opportunity for a legal challenge by delaying the action.
The case provided an opportunity to highlight the implications for Europe’s economy and highlight the importance of maintaining a level playing field for all EU member states, in or outside of the Eurozone. Independent research has shown the detrimental impact the FTT would have on Europe’s economy and in particular the £3.6bn detriment to household savings in the UK. It will have a particularly adverse effect on London as Europe’s financial centre.
Whilst TheCityUK respects the rights of Member States that have chosen to adopt the FTT, they in turn must respect the rights of Member States that have chosen not to.
The extraterritorial reach of the FTT will have a significant impact on firms and individuals conducting business in countries that have chosen not to participate in this initiative – it would apply to a branch of a British institution in Hong Kong trading a Greek corporate bond with an American bank.
Chris Cummings, Chief Executive of TheCityUK, said:
“The ECJ’s legal judgement focuses on the enhanced co-operation procedure. But what is really at stake here is the right of non-participating Member States to promote economic growth in their own markets.
“The Commission’s own impact assessment has shown that the FTT is bad for savers and bad for investors. It is the exact opposite of the type of intervention that is needed at the moment if the European economy is to be stimulated and if we are to show international markets that Europe is open for business. It will have a particularly adverse effect on London as Europe’s financial centre.
“The impact of FTT will be to make the EU less attractive to international institutions, risking international financial services companies to relocate elsewhere, damaging the EU’s economic recovery and long term growth.”
Warwick Business School Professor of Practice, Jon Rushman, speaking separately said:
“I am not at all in favour of Financial Transaction Taxes (FTTs). I think it is hard to argue that they fulfil a social purpose and describing them as ‘Robin Hood’ taxes is inaccurate and politically devious.
“They certainly aren’t taxes on bankers as some believe. They are taxes on investors, and I count anyone with funded pension or and ISA as an investor. So I fully support the UK’s objections.
“My research into the effects of Financial Transaction Taxes looked at what happened when the French introduced a 0.2% tax on all transactions on French equities in 2012. We found that the likely effects of the FTT were indeed lower trading volumes and volatility, but also lowering returns to French equity relative to other Eurozone equities.
“The ruling out of Luxembourg this week is a technicality. The argument still has a long way to run before any possible implementation. Under this government, the UK’s objection will likely become a point of principle and a source of friction with the EU. Indications are that a possible future Labour government would be more inclined to go along with the EU’s FTT proposals. That inclination could be amplified by continued propagation of the idea that the tax hurts bankers with no cost to ordinary people.
“Having watched markets become steadily more accessible and efficient in my lifetime through a combination of de-regulation and technology, I dislike attempts to reverse the trend. The EU was founded upon the ideas of free movement of people and capital and should remain committed to those guiding principles. I would find a centrally imposed FTT just as objectionable as a €100 levy for crossing a border.”