GERMANY, France and eight other EU countries took a step closer to implementing their own financial transactions tax (FTT) yesterday as the European Commission approved the plans.
That means London could gain if transactions, and the jobs that come with them, move to the City.
The EC wants the tax on transactions – like share, bond and derivatives trades – to be put in place across the EU, claiming the financial sector does not pay its fair share to governments.
But countries like Britain object on the basis that the move would simply drive financial activity to other business centres across the globe, depriving governments of even more tax revenue and hurting the economy.
London may be hit by the new tax in some ways – when trading with firms in the FTT countries, for example – but should benefit from an influx of firms that look to trade globally.
“Some major European houses are more interested in building up in London rather than elsewhere – if you want to do global business, the financial transactions tax incentivises you to move out of Frankfurt or Paris,” said Ernst & Young’s Rod Romans.
And financiers are keen the UK does not miss out on this opportunity.
“The UK should make a virtue out of fact it is committed to having the most competitive tax environment in the G7 – having a predictable tax environment is a key driver of location decisions for global firms,” said Chris Cummings from TheCityUK.