The UK said the 11 countries shouldn't use a special European Union coordination procedure, known as "enhanced cooperation", to launch a financial-transactions tax, lodging its legal challenge last April. The objection was based on the claim that the levy could affect transactions outside the 11 countries adopting it and impact EU Member States that opted out of it.
But the European Court of Justice rejected the UK's call on the grounds that it was premature and that its arguments were directed at elements of a future levy rather than the cooperation agreement in question.
"The contested decision does no more than authorize the establishment of enhanced cooperation, but does not contain any substantive element on the [financial transaction tax] itself," the ECJ said in a statement. The court's decision was broadly anticipated, especially as the ECJ brought it forward from the originally expected 2015 date, indicating the ruling had been straightforward. The way the ruling was framed leaves the door open for the UK to raise future challenges when the tax is closer to being adopted and its form and impact is clearer.
The ECJ's decision is important for the 11 participating member states as well, as it removes an obstacle to reaching an agreement. "We hope that today's decision will give added impetus to the 11 member states in their negotiations on the common FTT", said a spokesperson for the European Commission.
Finance ministers from these countries are expected to discuss the tax on the sidelines of an EU finance ministers' meeting in Brussels on 6 May.
The point of the levy, whose annual revenue was estimated by the commission to be around €30 billion to €35 billion, is to discourage speculative trading and ensure that the financial sector pays back part of what it received from taxpayers in bailouts during the financial crisis.
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Official press release © Curia
The proposed Financial Transaction Tax has seriously damaging implications, according to AFME. The organisation is disappointed by the European Court of Justice’s decision. Simon Lewis, AFME Chief Executive, commented: "Given the seriously damaging implications of the proposed Financial Transaction Tax, we are disappointed by the European Court of Justice’s decision. However, the judgment is focused on procedural matters, and this has always been a possible outcome. We urge the 11 countries involved to take the opportunity to revisit the need for a tax that will act as a brake on economic recovery in Europe by increasing costs to investors and companies. All the evidence continues to show that the proposed transaction tax will have serious harmful economic effects for end‐users of financial markets throughout Europe – not only within the 11 member states that are considering it. Against this background, the UK was right to mount a legal challenge."
TheCityUK comments on Today’s Ruling on the FTT: The Government was right to bring a case to the European Court of Justice on the proposed Financial Transaction Tax (FTT) given the consequences of its introduction for the UK’s economy. Today’s ruling from the European Court of Justice enables the UK to restate its case at a later date. It is better to have pressed the case early than to have missed the opportunity for a legal challenge by delaying the action.
Whilst TheCityUK respects the rights of Member States that have chosen to adopt the FTT, they in turn must respect the rights of Member States that have chosen not to. The extraterritorial reach of the FTT will have a significant impact on firms conducting business in countries that have chosen not to participate in this initiative - it would apply to a branch of a British institution in Hong Kong trading a Greek corporate bond with an American bank.
© Wall Street Journal
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