Excessive risk taking by the investment arms of major banks was blamed by some for contributing to the Global Financial Crisis. Politicians love to be able to place the blame for the economic situation at somebody else’s door, so the idea of raising a tax on financial transactions was very popular with some European leaders; notably the French and Germans. The idea was that a transaction tax of 0.1% (shares and bonds or 0.01% on derivatives) should be set on all transactions originating within or involving financial institutions within the EU. The Financial Transaction Tax (FTT) was estimated to be worth something like €50 billion per annum.
The British government was completely opposed to such a tax – much of which would be raised in Europe’s largest financial centre: London – fearing that it could drive business outside the EU. In the end, only 11 of the EU’s 27 states decided to push ahead with the measure. The take from FTT was then estimated to be worth €30 to 35 billion PA. The UK has raised a legal challenge to the move, arguing that it could affect deals in London involving FTT states banks with branches in London.
The idea of FTT has hit another setback in the shape of a legal opinion from the EU Council legal service. In their opinion, the lawyers conclude that FTT is incompatible with the EU treaty since it "infringes upon the taxing competences of non-participating member states". It “exceeds member states' jurisdiction for taxation under the norms of international customary law". Since the tax would only be adopted in 11 of the 27 EU states, the tax would be "discriminatory and likely to lead to distortion of competition to the detriment of non-participating member states”
The document is “just” a legal opinion, but taken with the objections of the British and the reluctance of 15 other EU states to adopt it, it must represent a serious setback to the proposal.