Chancellor appeals to European court of justice over plan for worldwide euro levy put forward by 11 EU countries
Britain is mounting a legal challenge to plans by 11 European nations to adopt a new financial transactions tax amid concerns that the plan will affect banks and institutions in countries outside the scheme.
The scheme, also known as a Tobin tax, would put a levy on all euro transactions anywhere in the world. But hopes for it suffered a setback when George Osborne said in Washington that the UK was taking the case to the European court of justice (ECJ).
"I am not against financial transaction taxes in principle," the chancellor said, noting that the UK put stamp duty on shares. "But I am concerned about the extra-territorial aspects of the European commission's proposals."
Earlier this year 11 countries – Germany, France, Spain, Italy, Belgium, Portugal, Greece, Austria, Slovakia, Slovenia and Estonia – said they had formed a "coalition of the willing" that would allow them to forge ahead with the new tax despite the misgivings of other member states.
Despite opting out of the scheme, Britain and other non-participating members had until Thursday to launch a legal challenge to the specific proposals for the levy drafted in Brussels. Osborne confirmed this had been done, but said Britain's concerns were shared by a number of other countries including the US. The chancellor has also expressed his concerns to the German finance minister Wolfgang Schäuble.
Britain's objections concern the scope of the tax. Treasury sources said under the current plans it would be levied on a trade in a euro-denominated financial instrument conducted in Singapore by two American banks, for instance.
The City has also sought clarification on how the levy would affect euro trades completed in London between banks from countries not in the scheme, and from UK subsidiaries of banks in participating countries.
Osborne believes the tax will damage an already weak eurozone economy and be costly for savers and pensioners because the costs will be passed on.
It is thought the ECJ will take up to two years to consider the UK's case, but the Treasury believes the legislative process to put the tax into force will take longer. Britain believes its objections can be met while the legislation is being passed and sees the court case as an insurance policy.
Supporters of the financial transaction tax criticised Osborne's decision. Owen Tudor, spokesman for the Robin Hood Tax campaign, said: "This isn't about defending British interests against Europe – it's about defending one rather rich square mile against the wishes of people in Britain and across Europe.
"Not content with letting our banks off scot-free, Osborne now wants to prevent European countries from making their financial sectors pay to repair the damage caused by the crisis.
"Resorting to lawyers is the last refuge of a chancellor who has lost the argument.
"Not only is this morally wrong, it is breathtakingly hypocritical – the UK's own £3bn stamp duty on shares is collected wherever UK shares are traded and regardless of who is trading them."
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