By Stanley Pignal in Brussels
Britain will end up paying the European Union?s financial transaction tax whether it joins the scheme or not, the bloc?s top tax official has warned, but it would not receive the proceeds of the levy imposed in the rest of the EU if it continues to veto its entry into force.
Algirdas Semeta, the bloc?s tax commissioner, said London?s continued reticence to agree to an EU-wide
Tobin tax would result in the City paying money to continental tax collectors without Britain benefiting from the proceeds.
?The UK would lose a lot if other members decide to move ahead with a financial transactions tax,? he said. ?Because of its design, [Britain] will be subject to the tax, but at the same time, it will not receive any money from it.?
London, which can veto EU tax proposals, has stood firm against plans to introduce an FTT, worried about its impact on the City. George Osborne, chancellor, dubbed the levy ?a bullet aimed at the heart of London?.
But Brussels is looking to impose a tax in much of the rest of the EU, including the 17 countries of the eurozone and possibly others.
Such a levy could use the ?residence principle?, which taxes any trade made by a company that is located in the tax area, even if the trade is made in London or other non-EU financial centres. This would result in Britain being indirectly exposed to at least some of the FTT?s effects, though it could also benefit from an exodus from other European financial centres such as Frankfurt.
Mr Semeta argued that an FTT agreed by all 27 EU members could even help shore up the UK?s public finances by reducing its annual contributions to the EU?s 140bn euros-a-year operating budget.
?If you take into account the size of the financial sector in the UK, the FTT would collect significant amounts of revenues, part of which would go into the EU budget. This would reduce the UK?s contribution to the budget, which would help reduce their public deficit,? he said.
Under this 27-member scheme, the proceeds from the FTT would be mainly drawn from the City and other financial centres, but the ensuing cuts in the EU budget contributions would be distributed to all 27 EU members. This prompted David Cameron, prime minister, to claim recently that a European financial levy was about as fair to Britain as a ?cheese tax? on France.
France and Germany last week indicated they were both considering the reintroduction of stamp duty on stock exchange transactions as a first step towards a European FTT.
The move would align them with Britain, which has a stamp duty on shares. But it would stop well short of the broad levy tabled by the European Commission, which includes bond, derivative and some currency transactions.
?If the British aren?t willing to get closer to the European model of a financial transaction tax, it would make sense to talk with the British and other European states about the British model,? said Philipp R?sler, economy minister and vice-chancellor in German chancellor Angela Merkel?s coalition government.
Mr Semeta also said a new impact assessment carried out by the Commission would show that an FTT would have a ?negligible? impact on growth – once assumptions about the economic benefits of the resulting government spending were taken into account. A previous assessment had warned of a 1.8 per cent dent in EU economic output in the long term.
? The Financial Times Limited 2012