British Prime Minister David Cameron said on Sunday he would veto a European-wide financial transaction tax unless it was imposed globally, deepening a confrontation with European Union heavyweights France and Germany. He said France should be free to go it alone and introduce a financial transactions tax if it wished.
Paris and Berlin want an EU-wide tax on financial transactions but Britain is resisting, fearing it will damage the City of London, a global financial centre where much of the tax would be raised. Cameron's threat to block the tax comes after he angered EU partners last month by vetoing a new EU treaty on greater fiscal integration in the euro zone, aimed at defusing the euro debt crisis. Critics said his move risked leaving Britain isolated from the other 26 EU members.
"The idea of a new European tax when you're not going to have that tax put in place in other places, I don't think is sensible and so I will block it," Cameron told the BBC. "Unless the rest of the world all agreed at the same time that we are all going to have some sort of tax then we are not going to go ahead with it," he said.
EU-wide tax measures need approval from all 27 member states. French President Nicolas Sarkozy vowed on Friday to push ahead with a new tax on financial transactions, also known as a Tobin tax, even without France's EU partners, in the face of stiff British resistance.
"If the French themselves want to go ahead with a transaction tax in their own country, then they should be free to do so," Cameron said. Cameron said a transaction tax that applied only in Europe would cost jobs and tax revenues, drive lots of financial institutions elsewhere and be bad for the whole of Europe. He suggested other European leaders should copy taxes that Britain has on banks and share transactions.
The EU's executive European Commission adopted plans last September for a financial transaction tax under which stock and bond trades would be taxed at the rate of 0.1 percent, with derivatives taxed at 0.01 percent.
The Commission urged EU countries on Sunday to work together to agree a single approach on the transaction tax, based on its proposal, during the current six-month Danish EU presidency. "Based on the proposal put on the table, the Commission encourages member states to work with the Danish presidency to ensure a coherent approach on this important issue," a Commission spokeswoman said, asked for comment on Cameron's remarks.
The tax will be discussed when Sarkozy and German Chancellor Angela Merkel meet on Monday in Berlin and at a meeting of the European Council in Brussels on January 30.
Cameron may see political benefits in a more assertive approach to Brussels after his decision to veto the new EU treaty won him praise from eurosceptics on the right of his Conservative Party and brought him a boost in the opinion polls.
However, it angered his pro-European junior coalition partners, the Liberal Democrats. Cameron said it was a "myth" his veto left Britain isolated, saying euro zone members had met without Britain for years. He said fewer than 26 EU states may finally agree to the new pact.
Britain has opened a new battle front with its EU partners by saying members of the new "fiscal compact" should not take decisions on issues affecting the EU's single market for trade.
"Britain's interest is in having a strong single market that's determined at the level of the 27," Cameron said.
He said Britain would be part of agreements it had a national interest in joining, such as the EU single market and NATO, but not of the Schengen passport-free zone or the euro, which it had no national interest in joining.
Britain's Deputy Prime Minister Nick Clegg, the Lib Dem leader, hosts a meeting of his liberal allies from around Europe in London on Monday to promote his agenda of re-engagement with the EU after Cameron's treaty veto.