As predicted earlier this month, Europe’s highest court threw out the UK Government’s challenge to a financial transaction tax (FTT) aimed at preventing a group of 11 European countries from introducing what is also known as the ‘Robin Hood’ tax.
Supporters of the tax argue that the financial sector should pay its fair share after helping cause the economic crisis, and say that the tax would make it act more responsibly.
However, Chancellor George Osborne has expressed fears that the measure, also known as the Tobin tax after the economist who conceived it in the 1970s, could drive away investment across Europe and damage the City of London, Europe’s largest financial centre.
There are also concerns that it could wipe billions from UK pension funds and risks eroding the financial industry’s support for EU membership while hurting savers in the EU more than the financial services firms, which will merely pass on associated costs.
Meanwhile, the 11 countries, including Germany and France, seeking to introduce the tax are pushing ahead under the EU’s so-called enhanced cooperation procedure, after it failed to win the backing of all EU member states.
The Treasury challenged the move before the European Court of Justice (ECJ), arguing that the decision to proceed under enhanced cooperation could “impose costs on non-participating member states”.
In their ruling, the Luxembourg-based judges said it was too early to assess the impact of the FTT, as it is not yet certain how it will be implemented, adding that Britain’s arguments were directed “at the elements of a future tax, and not at the authorisation to establish enhanced cooperation.”
However, the Government has pledged to fight on and a Treasury spokesman said that it is determined to continue to ensure that the interests of countries outside the single currency but inside the single market are properly protected.