Business World

Monday 18 December 2017

Barroso transaction tax plan puts EU on collision course with Britain

European Commission president Jose Barroso. Photo: Getty Images
European Commission president Jose Barroso. Photo: Getty Images

THE European Commission has formally backed a financial transaction tax for all 27 EU countries - putting the UK on a collision course with France and Germany over the plan.

Berlin and Paris have been pressing the Commission to propose the tax on all types of financial investment systems, in an attempt to show taxpayers that governments are recouping some of the costs of the banking crisis.

But earlier this month British Chancellor George Osborne warned that such taxes could drive investment out of Europe and threaten the interests of the City of London.

The adoption by the Commission of the proposal - announced by European Commission president Jose Manuel Barroso in a "state of the union" address to MEPs in Strasbourg - sets up a clash with Prime Minister David Cameron at an EU summit in December.

After Mr Barroso's confirmation that the pressure is on EU leaders to agree the tax, his Taxation Commissioner Algirdas Semeta said: "With this proposal the European Union becomes a forerunner in the global implementation of a financial transaction tax. Our project is sound and workable.

"I have no doubt this tax can deliver what EU citizens expect: a fair contribution from the financial sector. I am confident that our partners in the G20 will see their interest in following this path."

But, speaking on the sidelines of a G7 summit earlier this month, Mr Osborne commented: "I am against an EU tax: there would be no point introducing a financial transaction tax that led, the next day, to our foreign exchange markets moving to New York or Singapore or anywhere else."

He said there would be many obstacles to implementing such a tax "unless you can get every jurisdiction in the world to sign up to it".

Meanwhile, Mr Barroso told MEPs that the answer to the current economic crisis was "more Europe".

But his call for more EU integration is also bound to be resisted by the Government as efforts continue to reassure jittery markets that the eurozone can be restored to stability.

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