EU financial transaction tax is illegal, say legal experts; Germany to push forward anyway
European Union lawyers reviewing a proposal to tax financial transactions of 11 member states have found that the measure goes against EU laws.
According to the legal experts, the proposed financial transaction tax (FTT) "exceeds Member States' jurisdiction for taxation," is not compatible with EU laws as it infringes on taxing abilities of non-participating states and is "is discriminatory and likely to lead to distortion of competition," the legal opinion reads.
The document is not binding, however, and according to Reuters, Germany still wants to introduce the legislation in 2014 as planned.
According to an insight report by US-based law firm Skadden, Germany, France, Italy and several other states are planning on implementing the tax through a procedure called "enhanced cooperation" – an EU provision which allows a minimum of nine member states to cooperate in some areas without the requirement of other members' involvement.
Several EU members have strongly opposed the measure, most notably the UK where members of the financial sector, including the London Metal Exchange, have argued that the tax would "lead to massive upheaval in the financial services industry," Reuters wrote in April.
The tax would be levied on bonds, derivatives, repurchase agreements and securities lending in an attempt to reduce risks in the financial markets.
According to the European Commission the three main objectives of the proposal are to prevent the fragmentation of the EU Single Market, ensure that the financial sector contribute its fair share to public finances and discourage financial activity which does "not contribute to the efficiency of financial markets or of the real economy."
Creative Commons image by: Xaf