City hits out at Tobin tax

Julian Harris
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ELEVEN of the City’s main financial groups have urged chancellor George Osborne to fight any proposed financial transactions tax, in a letter sent to the Treasury yesterday.

The City collective – which includes the British Bankers’ Association and Investment Management Association – argued that a tax would hammer the economy and affect all of the public, not just financial services.

The charge “would result in increased mortgage costs and reduced pensions for the public as the cost of managing risk and investing increases for the financial sector,” the letter said.

The tax, also known as a Tobin tax, has been proposed by the European Commission.

Conservative MEP Kay Swinburne warned recently that the UK could lose its veto over an EU-wide implementation if it was snuck through as a VAT measure. Yet law firm Clifford Chance last week dismissed the claim, insisting that Brussels cannot pass the tax through a “back door” route.

The lawyers also said that the chain of trades needed to purchase securities means that the proposed 0.1 per cent tax would, in effect, be more like a one per cent tax. The Vatican yesterday endorsed the tax, a move that pro-tax campaigners said increased pressure on the Treasury to accept the measure.