The European Commission's financial transactions tax proposal is clearly targeted to hit the City of London even though the UK is not one of the 11 EU member states taking part.
By Godfrey Bloom MEP
•The European Commission has issued new proposals on a financial transaction tax, making it crystal clear that financial institutions in member states such as the United Kingdom, outside the FTT-zone, can and will be taxed.
According to the commission proposal the tax "will be due if any party to the transaction is established in a participating member state, regardless of where the transaction takes place. This is the case both if a financial institution engaged in the transaction is, itself, established in the FTT-zone, or if it is acting on behalf of a party established in that jurisdiction."
Eleven nations have already signed up to participate in a tax on financial transactions and will proceed by the enhanced cooperation mechanism. Britain and 15 other members of the European Union will not introduce the tax. We now have it in black and white that the commission wants to tax financial institutions in the UK even though they are not within the FTT zone.
The commission proposal is clearly targeted to tax financial services in the City of London even though the UK government does not want to be one of the participating member states. This is a deliberate assault on the City of London. The UK government will have no say on this tax system but businesses within its borders will have burdened by this FTT. The commission obviously ignores the American cry of 'No taxation without representation' – they have ignored the lessons of history and will in time face rebellion.
This tax will help push financial services outside the EU altogether, to Switzerland and other growing financial centres around the globe. As my colleague Nigel Farage said recently: "This proposal is to introduce a financial transaction tax just in the EU. However, we live in a global economy, if we become uncompetitive through tax or regulation, people simply move their businesses elsewhere. To do this would be an act of Kamikaze economics." He is right.
And the UK Independence Party is not alone is our opposition to this taxation system. Experienced bodies including the United States Chamber of Commerce and The Financial Services Forum have written to the European Commission objecting to "the unilateral imposition of a global financial transaction tax", the Financial Times reported. "These novel and unilateral theories of tax jurisdiction are both unprecedented and inconsistent with existing norms of international tax law and long standing treaty commitments," they argued in a letter to Algirdas Semeta, the EU tax commissioner. "There is a high risk that their adoption could lead to double and multiple taxation, a deterioration of international tax co-operation and trade protectionism." They do not sound too enthused do they?
Allied to EU financial regulation – which was supported by every UK political party except UKIP – this financial transaction tax will do a lot of damage to the City. It is my opinion and unlike most MEPs I have extensive experience of the financial services industry – that what is happening here is the EU is taking an opportunity to bash the financial sector, and doing it in the most crude and harmful way. Another important issue here is the crucial rate of taxation. Mark my words; this taxation is just the beginning because the FTT tax rate will be ratcheted up over the coming years to squeeze more money from the financial services industry.
This transactions tax has been proposed now because the EU is desperate for money. When FTT proposals came up in the European Parliament, UKIP MEPs voted against the move, holding that it would cause the flight of capital and jobs out of the City of London and the EU area as a whole. It is the Swedish experience that unilaterally imposed financial taxes leads to the flight of capital and expertise elsewhere. The EU will be no different.
Godfrey Bloom is a UKIP MEP and the party spokesman on economic affairs