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Lawyers say imposing a financial transaction tax ‘would be illegal’

In a 14 page legal opinion, the EU bloc’s lawyers have suggested that to introduce the contentious financial transaction tax (FTT) would ‘exceed member states’ jurisdiction for taxation under the norms of international customary law’.

The proposed tax, which is also known as the Tobin Tax or Robin Hood Tax, would be applied to stocks, bonds and repurchase agreements, amongst others, with the aim of discouraging risk-taking.

Eleven European Union member states have signed up to go ahead with the tax, but the UK was among several other states that refused to sign up to the plan. In April, the UK Government launched a legal contest to the plans in the European Court of Justice. The Robin Hood Tax Campaign group said that the UK’s legal decision was about ‘defending one rather rich square mile’.

The lawyers’ report commented that the FTT was also incompatible with the EU treaty because it ‘infringes upon the taxing competences of non-participating member states’.

The report is only legal opinion and therefore not binding, however the head of financial services and corporate governance for the Confederation of British Industry, Leo Ringer commented that ‘This opinion recognises that the FTT would have damaging implications for growth, jobs and investment beyond the member states involves, so now is the time to draw a line under this flawed proposal’.