EU executive plays down transactions tax impact on UK
LONDON, March 19
LONDON, March 19 (Reuters) - A tax on trading in 11 euro zone countries won't harm Britain and its government cannot be forced to collect the levy, a senior European Commission official said on Tuesday.
The European Union executive has proposed a transactions tax from January 2014 on stocks, bonds and derivatives listed in 11 countries to make banks pay for taxpayer help in the financial crisis.
It will also apply in all other countries where there are trades linked to stocks, bonds and derivatives from the 11 participating countries.
Britain, the EU's biggest financial trading centre by far, fears its markets will be sucked into the tax, causing a drop in trading volumes.
Italy, included among the 11 going ahead with the tax, introduced its own levy on share trades this month, triggering a sharp fall in equity volumes.
"There is no risk that the City of London will be negatively impacted," Manfred Bergmann, European Commission director for indirect taxation, told a panel of lawmakers from Britain's upper House of Lords.
The first task is to finalise the tax so that it works, in the hope other EU states and countries elsewhere in the world will join later on, Bergmann added.
Britain, Sweden, the United States and Canada have all rejected such a levy on trading, also dubbed a Tobin Tax after the U.S. economist who devised it in the 1970s.
Bergmanm said the Commission remains "silent" for now on how the tax, estimated to raise up to 35 billion euros a year, will be collected, especially in countries not taking part.
"There is no extra burden on non-participating member states to collect the tax. Will the City of London be forced to collect tax for Germany and France? No," he added.
It was up to the 11 countries taking part to decide how they wanted the revenue collected, he said.
Germany and France led the pressure for the Commission to draft proposals for a levy by a core group of countries after failing to win backing for an EU-wide measure.
Some lawmakers doubted if the tax would ever be introduced, while others quizzed by the panel saw huge hurdles to getting non-participating countries to cooperate.
"I don't think the Americans are ever going to introduce this," said Richard Woolhouse, head of tax at the CBI, a UK business lobby.
The United States will see the cross-border reach of the tax as a threat, which could have implications for a mooted EU-U.S. trade deal, Woolhouse added.
"Either directly or indirectly, the cost will be borne by the business sector through a higher cost of capital or lower returns to savers," Woolhouse said.
John Vella, a senior research fellow at Oxford University's Centre for Business Taxation, told the panel the tax was "not a good idea" and would have a negative impact on Britain.
"It will introduce new distortions to competition. We are going to have new cases of double taxation," Vella said.
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