EU plans to levy direct tax on UK

EUROPEAN bureaucrats are preparing plans for an EU-wide levy on financial transactions, domestic aviation and carbon dioxide emissions, putting them on a collision course with the British government.

The European Commission wants to impose a series of pan-European taxes to fund its €140bn (£116bn) annual budget, allowing cash-strapped member states to reduce the amount of revenue they hand over to the union.

Janusz Lewandowski, EU budget commissioner, said a tax on all financial transactions that take place in the 27-member bloc was one of the options under consideration. Such a levy would hit the banking and financial services sectors hardest.

A separate plan for a levy on aviation within the EU is also being worked on, with the final proposals set to be unveiled in September.

The British government – which has promised to hold a referendum before handing any new powers to Brussels – moved quickly to voice its opposition to the plans. Commercial secretary Lord Sassoon, a former investment banker at UBS, insisted the EU should not be allowed to raise taxes.

He said: “The government is opposed to direct taxes financing the EU budget. The UK believes that taxation is a matter for member states to determine at a national level and would have a veto over any plans for such taxes.”

Angela Knight, chief executive of the British Bankers’ Association, said European banks would consider relocating outside of the union to avoid the planned levy.

“The Commission has to recognise that these banks are not just part of a region – they’re part of the world. And a global financial business can shift quite easily. Any new levy should be done in accordance with – and on the same timetable as – our G20 partners.”

The Commission is desperately trying to find ways to fill its coffers, amid fears that debt-ridden countries will scale back their contributions to help reduce their burgeoning budget deficits.

Lewandowski said: “I’m hearing from several capital cities – from important ones like Berlin – that they would like to reduce their contribution. Many countries want to be relieved. And because of that, the door has been opened on discussions over income for the EU itself that does not get claimed by the finance ministers.”

Meanwhile, the German government also said it would oppose any attempt to introduce a pan-European tax. “Demands for the introduction of an EU tax are in contradiction to the position taken up by the government in its coalition treaty”, said a finance ministry spokesman.