Wednesday

20th Mar 2019

EU top court throws out UK challenge to transactions tax

  • The EU's top court has dismissed a UK challenge to plans for a financial transactions tax. (Photo: Alan Cleaver)

The European Court of Justice on Wednesday (30 April) rejected a UK legal challenge to plans by eleven countries to set up a financial transactions tax (FTT).

The main thrust of London's opposition to the tax relates to the so-called "residence" and "issuance" principle in the proposed bill, which means that some traders operating outside the FTT-11 would still be liable to pay the levy. The UK, which has the largest financial services sector in the EU, says that it would be hit by the tax as a result.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

  • The political impetus behind the FTT has stalled (Photo: TPCOM)

But since the proposal has not been agreed, the UK case was restricted to challenging the right of the eleven countries, led by France and Germany, to proceed with the bill.

However, in a statement on Wednesday (30 April), the Luxembourg-based court said that "the Court considers that the two arguments put forward by the United Kingdom are directed at elements of a potential FTT and not at the authorisation to establish enhanced cooperation, and consequently those arguments must be rejected and the action must be dismissed."

In response, a UK government statement remarked that the challenge had "always been seen as a precautionary measure designed to eliminated any risk that a later challenge was ruled out of time".

A spokesman for the UK Treasury added that "today's decision confirms the UK will be able to challenge the final proposal for a Financial Transaction Tax if it is not in our national interest and undermines the integrity of the single market. We risked not being able to do that if we had not made this challenge now."

The UK argues that its challenge to the FTT is part of a strategy to ensure that the EU's single market does not become fragmented between the countries in and outside the eurozone.

Critics say that the UK's opposition to the tax is just a ploy to defend "one rather rich square mile," a reference to London's financial quarter.

Campaigns for an EU-level tax on financial transactions grew following the 2008-9 financial crisis. Having initially rejected plans from the European Parliament to propose a tax, EU taxation commissioner Algirdas Semeta drafted legislation for an FTT across the entire EU in 2011.

However, after a handful of countries, both inside and outside the eurozone, vetoed the plan, eleven countries agreed to activate the EU's 'enhanced co-operation' clause in early 2013 which allows a group of countries to proceed.

The proposal currently on the table includes a 0.1 percent levy on bonds and shares and 0.01 percent on derivative products.

France and Germany have led support for the tax, often dubbed by supporters as the 'Robin Hood tax', with policy-makers seeing it as a way to make the financial sector bear some of the costs of the economic crisis and a measure to dampen speculation on the bond and derivative markets.

The commission says that €30-35 billion in revenue would be raised each year in the 11 countries involved, although its impact assessment indicates that the tax could also lead to a 0.3 percent reduction to the EU's GDP.

However, the political impetus behind the tax has stalled in the past year although France and Germany have pledged to reach a broad agreement amongst national civil servants on the proposal before May's European elections.

EU court hands UK win over euro trading

The EU’s General Court has handed the UK a notable victory in financial services regulation by striking down plans by the European Central Bank to require firms which process securities trades to be located within the Eurozone.

EU financial transaction tax on life support

Ten EU countries agreed Tuesday on "core principles" to tax financial transactions, but real discussion was delayed and the UK threatened court action if the tax goes against its interests.

News in Brief

  1. Merkel: I will fight to the 'last hour' for orderly Brexit
  2. EU affairs ministers demand Brexit clarity from London
  3. Nordic MEP candidates in first ever joint EU election debate
  4. UK announces EEA trade deal ahead of EU summit
  5. Four European cities among world's most expensive
  6. Violent 'yellow vest' protesters ban in Paris
  7. Russia celebrates fifth anniversary of Crimea annexation
  8. Blow for May as third vote on Brexit deal ruled out

Magazine

The changing of the guards in the EU in 2019

The four most powerful EU institutions - Commission, Parliament, Council and Central Bank will all have new leaders in the coming ten months. Here is an overview.

Magazine

All about the European Parliament elections 2019

EUobserver's new magazine is meant to help readers prepare for the European Parliament elections, no matter their level of knowledge. You can download and read the entire magazine now.

Stakeholders' Highlights

  1. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  2. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  3. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  4. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year
  5. Nordic Council of MinistersNordic commitment to driving global gender equality
  6. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan
  7. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  8. Nordic Council of MinistersNordic talks on parental leave at the UN
  9. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  10. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  11. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID
  12. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership

Latest News

  1. Have a good reason for Brexit extension, Barnier tells UK
  2. EU countries push for new rule of law surveillance
  3. EU rolls out €525m for military projects, but bars illegal tech
  4. May to seek Brexit extension amid UK 'constitutional crisis'
  5. Catalan independence trial is widening Spain's divides
  6. My plan for defending rule of law in EU
  7. Anti-corruption lawyer wins first round of Slovak elections
  8. The changing of the guards in the EU in 2019

Join EUobserver

Support quality EU news

Join us