(Financial Times) -- Wall Street and the US administration have attacked a proposed eurozone financial transaction tax, claiming it overreaches borders, flouts international treaties and "breaks the bonds that bind our global economy".
The European Commission
will on Thursday unveil an ambitious plan for an international levy on
financial trades to be collected by the eurozone's biggest economies,
raising an estimated €30bn-€35bn a year.
This tax blueprint, first
reported in the Financial Times, includes tough anti-avoidance measures
that would catch some trades executed in New York, London, or Hong Kong
-- even when no eurozone entity is buying or selling the product.
While the commission is
confident the plan is legally sound, the long arm of the levy has raised
the hackles of big investment banks, as well as the UK and Luxembourg,
which rejected such an EU-wide tax.
The US, which has long
been opposed to a transaction tax, has also voiced its concerns. A
Treasury spokesperson said the levy would "harm US investors in the US
and elsewhere who have purchased affected securities".
If France, Germany and
nine other states press ahead with a tax based on the commission's
expansive proposal, it is likely to be challenged by some EU governments
and big financial groups, according to several diplomats and lawyers.
A coalition of US
business groups -- including the US Chamber of Commerce and The
Financial Services Forum, the body for the largest US financial groups
-- have written to the commission objecting to "the unilateral
imposition of a global financial transaction tax".
"These novel and
unilateral theories of tax jurisdiction are both unprecedented and
inconsistent with existing norms of international tax law and
long-standing treaty commitments," the groups argue in a letter to
Algirdas Semeta, the EU tax commissioner.
"There is a high risk
that their adoption could lead to -double and multiple taxation, a
deterioration of international tax co-operation and trade
-protectionism."
Europe's first 'Tobin
tax', named after economist James Tobin who mooted a global tax on
currency trades in the 1970s, levies 0.1 per cent on stock and bond
trades and 0.01 per cent on derivatives transactions involving one
financial institution with its headquarters in the tax area, or trading
on behalf of a client based in the tax area.
As "a last resort", the
tax is also applied to transactions based on where the share, bond or
exchange traded derivative was issued, even if it takes place in Asia,
the US or Britain.
Such a levy is dubbed a Tobin tax after economist James Tobin, who mooted a global tax on currency trades in the 1970s.
Alexandria Carr, a
former UK Treasury lawyer now at law firm Mayer Brown, said those 11
countries moving ahead under so-called "enhanced co-operation" are
legally bound to respect the rights of member states that do not
participate.
"If [the] proposal has
the expected extraterritorial reach, it would appear to ride roughshod
over the competences of the 16 member states who have opted out," she
said.
Those countries that
have expressed interest in a transaction tax include Belgium, Germany,
Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and
Slovakia.
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