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Financial transaction tax faces collapse after EU legal challenge

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The financial transaction tax proposed by 11 EU countries could face collapse after EU lawyers warned it could be illegal.

The FT reports EU ministers have received legal advice that the tax “infringes” EU treaties and is “discriminatory” to non-participating states.

Germany, France and Italy have led the charge to introduce a tax on all financial transactions in their countries, similar to the UK’s stamp duty but more expansive.

The EU Council legal service’s rejected the tax’s “residence principle” which would tax groups according to where they are based rather than where the trade takes place.

It says such a move would infringe with the taxing competencies of member states.

UK banks and financial services firms have lobbied hard against the change, arguing it would hit UK jobs and increase prices on consumer products.

The 11 nations have been determined to press ahead but have faced a legal challenge from the UK and already been forced to water down proposals.

The EU Council legal service’s assessment concerns the application of the tax to groups outside the bloc, which it says would conflict with the taxing competencies of member states.

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