Proposals for a Financial Transaction Tax (FTT), to be implemented by a ‘breakaway’ group of the EU, could significantly damage the UK and the rest of the EU, a Lords committee has found.
The Lords EU Sub Committee on Economic and Financial Affairs has today published a follow up to its March 2012 report on the Commission’s proposals for a Financial Transaction Tax.
Now the Commission has given the green light to a sub-group of 11 Member States to move forward with a significantly revised tax proposal, under a process known as enhanced cooperation – a move which the Lords Committee is condemning as being ‘divisive’, ‘significantly detrimental to the UK’s interest’ and ‘deliberately contentious in such a controversial area’.
The Committee report found serious flaws with the Commission’s use of enhanced cooperation, namely:
The tax would have an adverse impact on institutions in the non-participating Member States, such as the UK;
The legislation could see the UK unfairly being required to collect the tax on behalf of other Member States, such as Germany and France;
This use of enhanced cooperation fails to meet the requirements of EU law, including in respect of the Single Market; and
The flawed process by which the Commission has allowed enhanced cooperation to be used risks undermining its use in the future.
The Committee criticises the UK Government for their slowness to appreciate the potential damage to the UK that such a tax could present. However they welcome the Government’s belated decision to launch a legal challenge in a bid to annul the decision.
The Committee has also expressed its frustration with the Commission for dragging its feet in providing details on the obligations faced by UK authorities to collect the tax, adding that it was ‘unacceptable’ that the full implications of the proposal were not made plain before the vote on enhanced cooperation took place.
Commenting on the report, Lord Harrison, Committee Chairman, 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. In giving this the go-ahead we believe the Commission has only paid lip service to the legal requirements for enhanced cooperation, and has failed in its duty to countries such as the UK who oppose the move.”
“The Commission has a duty to all 28 of its Member States equally, and this sort of cavalier approach to legislation risks making losers of us all.”