A NEW tax on financial transactions (FTT) will drive business out of London, Boris Johnson warned yesterday, as the European Court of Justice kicked out a British challenge to the tax.
Countries like France and Germany want to tax each trade of shares issued in their countries, wherever in the world they are traded. Bonds and derivatives may also be affected.
As a result financial trades in London will be hit, even though the UK is not taking part in the tax.
“The last thing that we need is a barmy tax that will stamp on growth and potentially drive businesses to financial centres outside the EU,” said the mayor of London.
“Finance is a global game and our rivals in the US and Asia will be licking their lips in sheer delight. This ruling also raises serious questions about how the UK can safeguard its financial services sector given that we are not in the euro.”
A challenge by the Treasury hoped to stop the tax before it comes in on the basis that it undermines the single market and is against Britain’s national interest.
The court rejected the challenge, arguing that the UK will have to wait until the tax comes into action before challenging its legality.
The Treasury said it intends to take up the chance to appeal when the tax is finalised.
City groups said savers and pensioners will be particularly hard hit if the tax does come in.
“The European Commission’s own impact assessment has shown that the FTT is bad for savers and bad for investors,” said Chris Cummings from TheCityUK, citing estimates that the tax will hit household savings in Britain to the tune of £3.6bn.
“It is the exact opposite of the type of intervention that is needed at the moment if the European economy is to be stimulated and if we are to show international markets that Europe is open for business. It will have a particularly adverse effect on London as Europe’s financial centre.”