Osborne in fresh warning over EU-wide FTT
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Chancellor George Osborne says an EU-wide financial transaction tax may not raise any additional revenues for the UK Government.
Responding to a request for information on the impact of an EU-wide FTT by Treasury select committee chair Andrew Tyrie, Osborne warns any gains in direct revenue would be offset by losses in other taxes, such as £3bn a year in lost stamp duty.
Osborne says he would expect a reduction in corporation tax revenue due to the impact of the FTT on the financial services sector and further losses from some FTT payments from institutions headquartered in other EU member states going to their home government rather than the UK.
He adds: “Overall, it is possible that the tax might raise no additional money at all for the Exchequer.”
Osborne says it is difficult to estimate the impact of a euro area-only FTT but highlights that the UK’s financial services sector had £42bn of net exports in 2009, a third of these to EU customers.
Tyrie says: “The Chancellor is telling us that an EU-wide FTT might raise no additional money at all for the Exchequer. Financial services is a highly competitive and mobile global industry - if the European business and fiscal environment is unfavourable then firms will vote with their feet.
“As home to Europe’s only truly global financial centre, the UK will be disproportionately affected. It is not just financial services that will suffer but pension funds and any businesses trading with Europe. It is crucial to avoid damaging unintended consequences.”
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Readers' comments (1)
Rhone | 21 Dec 2011 1:06 pm
Transaction tax may not raise revenue? Economic sub-committee of the House of Lords regarding Europe's FTT proposal, "The FTT is likely to induce a loss in GDP between five and 20 times larger than the revenues raised from the tax." That GDP loss would have gotten taxed at around 45%. Swedish Finance Minister Anders Borg warns often that a financial transactions tax in Sweden saw implementation costs of the tax out-run revenues, and the tax itself achieved 3% of projected revenues-before subtracting negative revenues from reduced GDP.
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