Cameron attacks finance tax in defence of the City

Tim Wallace
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THE EUROZONE’S planned financial transaction tax (FTT) took a triple blow yesterday as Britain stepped up its campaign against the charge, German businesses warned it would harm even non-financial firms, and Germany’s finance minister said the tax is not a priority.

Eleven countries back the FTT which would impose a charge on all transactions of shares, bonds and derivatives as long as they originated in the 11 states or if any party involved in the transaction is based there.

The stated aim is to make the financial sector pay for the damage it caused in the crisis, but critics fear it will hurt normal customers and investors too.

David Cameron told a meeting of international investors that the tax’s main effect would be to drive finance firms and jobs out of the EU altogether.

“The FTT is not a good idea. Unless it is introduced in the same way all over the world, it is a mistake for Europe,” the Prime Minister said.

“It is not just an industry that serves Britain but Europe too. And we are not going to make Europe a fairer place if large parts of our financial services relocate to Shanghai or Singapore.”

He was joined by German finance minister Wolfgang Schauble who hinted the EU’s biggest economy could be backing away from the plan.

“We are just beginning this discussion. It is not a major concern,” he said at the same conference.

The new offensive against the FTT comes after the German Stock Institute, a business group, said firms’ pension funds will be hit hard by the new tax.

“Even under conservative assumptions, the company must reckon with an additional load of up to €1.5bn (£1.3bn) annually,” they estimated in a report studying the impact on 24 major firms.

And the report also worried that exporting firms will be hurt when they buy derivatives to hedge their foreign exchange exposures.

“The FTT has enormous breadth and is a direct blow to the export-oriented German economy, which is dependent on effective hedging and convenient financing options,” said the group’s chief Christine Bortenlanger.