Britain has launched a legal challenge against a plan by 11 euro zone countries to set up a financial transaction tax, finance minister George Osborne said on Friday. Britain was concerned that the planned tax, drawn up by the European Commission, would hurt its interests because it would affect transactions carried out beyond the borders of countries that sign up for it, Osborne told reporters.
"We're not against financial transaction taxes in principal ... but we are concerned about the extra-territorial aspects of the Commission's proposal," he said on the sidelines of meetings of finance leaders at the International Monetary Fund. The British government filed the challenge to the European Court of Justice on Thursday, the deadline for challenging the Commission's proposal, a Treasury official said.
US Treasury Secretary Jack Lew has voiced opposition to the planned tax which would affect banks on Wall Street and other financial centres around the world. The 11 euro zone countries intend to introduce the tax on stock, bond and derivatives transactions next January, raising up to 35 billion euros a year to make banks pay for aid they received in the financial crisis.
There are provisions to ensure the levy is applied no matter where securities from the 11 states are traded, though it is unclear how and by whom the tax would be collected, especially in non-participating countries. The British Treasury official said the government hoped it could resolve its differences over the planned tax through negotiation. The official said Thursday's move by the UK, challenging the European Commission's backing for the initiative, kept its legal options open as the transaction tax takes clearer shape in the year ahead.
A pan-EU proposal for the tax failed due to opposition from Britain, home to the City of London and Europe's largest financial services industry, as well as other member states including Sweden. UK lawmakers have criticised the government and the financial sector for not doing enough to stop the tax, saying Britain should go to court to halt the plans.