|Two of the City’s heaviest hitters have declared Europe’s financial transaction tax “insane” and have thrown their weight behind the Government’s legal challenge against the 11 EU members pressing ahead with the levy.
The withering attack by Xavier Rolet, boss of the London Stock Exchange, and Jim O’Neill, chairman of Goldman Sachs Asset Management, followed a move by Luxembourg to back the UK.
At an event at the City Week annual forum, Mr O’Neill asked panellists: “What in a nutshell should [Treasury minister Paul Deighton] take back to Government to make sure the City is supported – other than standing against this ridiculous financial transaction tax?”
Mr Rolet had earlier said: “I agree with you, Jim, [about] that insane financial transaction tax.”
The Government last week launched a legal challenge in the European Court of Justice against the tax – which France Germany, Italy and eight other eurozone members expect will raise €35bn annually. The UK filed its claim in protest at its “extraterritoriality” powers that will allow the 11 countries involved to collect taxes in London, New York, Singapore and any other jurisdiction where euro-denominated trades occur.
Luxembourg’s finance minister Luc Frieden has already said he would “bring arguments in support of the case being brought by the UK”, and the US Chamber of Commerce chief executive Thomas Donohue has claimed the US “will not allow the FTT to happen”.
Sweden is also against the FTT, having introduced their own version in the late 1980s. Speaking in Washington last week, Stefan Ingves, the Governor of Sweden’s central bank, the Riksbank, said: “My first job when I moved from the private sector was to put together this FTT. Based on that experience, I would strongly advise against a transaction tax. The economics of it is such that it is unwise to put it in place. In our case, it was a wonderful thing for London. All the trades moved to London and turnover fell dramatically, so the revenue was just a fraction of what was expected.”
The 11-strong group hopes to avoid a repeat of Sweden’s mistake by applying the “extraterritoriality powers”, but under EU law other members can contest a minority plan if it threatens their economic interests.