The Prime Minister told a hall of delegates at Davos that the tax policy was “simply madness” at a time when “five EU Member States are now less competitive than even sclerotic Iran” – a comparison unlikely to win him many friends on the continent.
And Brussels is in no mood to compromise. City A.M. has learned that several senior European Commission officials recently briefed bankers in Brussels that there is a growing belief that the UK will have to hold a referendum on EU membership by 2020.
They voiced the view that Cameron could be forced to include a promise on holding a vote in the Conservatives’ next manifesto in order to win an outright majority.
The officials added that the Commission plans to threaten Britain with exclusion from vital negotiations on the Tobin tax if the government does not agree to submit to it.
Even though the UK does not want to impose a levy, London is still keen to have a seat at the table. Without any UK presence, Brussels could attempt to design a Eurozone-only levy that would capture some City transactions.
The EC officials said in their briefing that there is now no chance that there will not be some form of pan-European Tobin tax – although some bankers believe it could be watered down to make it less damaging.
It is understood that the Commission is now working on four plans for the tax: the first involves a levy at the European level covering 27 nations, the second a tax for the 17 Eurozone countries, another at a global level and a final one for a subset of Eurozone states. But the scope of the tax is still up in the air.
The private stance of Brussels’ most powerful body couple could see Britain increasingly forced to choose between submitting to European taxes and regulation and leaving the political union entirely.
Cameron attacked those regulations with unusual ferocity yesterday, saying: “The EU has promoted unnecessary measures that impose burdens on businesses and governments, and can destroy jobs.”
However, he also said: “Britain is part of the European Union. Not by default but by choice.”