The UK government’s attempt to eliminate a European Financial Transaction Tax (FTT) was rejected by the European Court of Justice on Wednesday.
The proposed financial transaction tax (FTT) – commonly called the Tobin tax after economist James Tobin who first proposed the idea in the 1970s – would hit GPs by imposing a 0.1 percent levy on most equity and debt transactions originating in Europe.
The UK has long opposed the controversial measure, arguing that it would move trading activity out of the UK to non-EU countries where the tax doesn’t apply. Because only 11 of the 28 EU members signed on to the controversial tax, critics also say it would be discriminatory and leave certain EU states at a competitive disadvantage.
The tax is due to be enforced in the 11 participating EU countries through “enhanced cooperation” – a term describing nine or more EU member states deciding to move ahead with an initiative proposed by the Commission once it proves too difficult to reach unanimous agreement in all member states. The 11 countries participating are: France, Germany, Belgium, Austria, Slovenia, Portugal, Greece, Slovakia, Italy, Spain and Estonia.
Nonetheless, the future of an EU trade tax remains uncertain. The tax was originally planned to enter into force at the start of the year, but disagreements over the minutiae of the rules delayed its implementation. It is unclear if the tax will be implemented before the spring EU elections, but Greece, which holds the rotating EU presidency until July, has committed to giving the issue priority. A European court will also need to review the final proposal to determine if it would have a discriminatory impact on EU countries who don’t adopt the tax.
The UK remains hopeful the tax will ultimately be scrapped. The court’s decision on Wednesday allows the UK to challenge the final proposal “if it is not in our national interest and undermines the integrity of the single market,” a Treasury spokesperson said. “We risked not being able to do that if we had not made this challenge now.”