ECJ dismisses UK’s FTT challenge
The European Court of Justice (ECJ) has dismissed the UK’s first financial transaction tax (FTT) challenge.
The ECJ deemed the UK’s challenge premature as the current proposals for the adoption of enhanced cooperation by 11 EU member states do not contain any substantive details on the FTT itself.
The court said that the UK’s appeal was “directed at the elements of a potential FTT”. The ECJ also pointed out that there was no substantive evidence of the extraterritorial effects the UK claims a tax on trading assets would cause.
It was only able to review the decision that authorised those countries to negotiate the tax, through “enhanced co-operation”.
The ECJ recognised that by contesting the authorisation of the FTT, the UK was reserving its right to challenge the implementation of such a law.
The UK Treasury told the BBC on the day of the decision that it is prepared to take further legal action.
"The government is determined to continue to ensure that the interests of countries outside of the single currency, but inside the single market, are properly protected" said a Treasury spokesman said.
Despite the dismissal, many are regarding today’s ruling as a technicality, and believe that the case has effectively been put on hold until the FTT is implemented.
“Today's court ruling means the legal issues now take a back seat,” said Mark Persoff, partner in financial services at EY. "The important thing for the City to watch now is the political negotiations between the <11 eurozone countries> participating in the enhanced cooperation process with respect to the precise form of FTT.”
"Our expectation is that the outcome of the political negotiations is likely to remove many of the issues raised in the UK complaint. However, to the extent that they do not, the UK should be able to come back to the once more,” Persoff added.
Whilst proponents of FTT believe that the so-called Robin Hood tax will reign in speculative asset trading, there is widespread doubt within the investing community that this will be the case. Many UK financial firms wholeheartedly support the UK government’s action.
The National Association of Pension Funds (NAPF) urged the government to remain vigilant against this threat to British savers and pensioners.
“The FTT is not the best way to reduce excessive risks or tackle bad behaviour in the markets,” said James Walsh, policy lead: EU and international at the NAPF.
“In addition, the cost of this tax would undoubtedly be passed on to the millions of private savers and pension scheme members in the UK by the financial institutions and banks that manage their investments.”
TheCityUK’s CEO, Chris Cummings agreed, noting the adverse effects London would face and further suggesting that FTT would cause damage to the EU as a whole:
“The impact of FTT will be to make the EU less attractive to international institutions, risking international financial services companies to relocate elsewhere, damaging the EU’s economic recovery and long term growth.”
Substantive developments in the FTT discussions are expected to take place on May 6 in Brussels during a meeting of the finance ministers of the 11 eurozone states involved in the enhanced cooperation proposed.
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