Cameron vows to veto financial tax

Cameron Oct 2010 Picnik.jpg

British Prime Minister David Cameron said yesterday (8 January) he would veto a European-wide financial transaction tax unless it was adopted globally, deepening a confrontation with European Union heavyweights France and Germany. 

Cameron 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 eurozone, aimed at defusing the euro debt crisis. Critics said his move risked leaving Britain isolated from the EU's 26 other 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.

EU's plan B

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. A senior French official said on Sunday his country could table a parliamentary bill for a new tax as soon as February.

"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 arm, the European Commission, adopted plans in September for a financial transaction tax under which stock and bond trades would be taxed at the rate of 0.1%, with derivatives taxed at 0.01%.

The Commission says it may push for a tax among a smaller group of members if agreement by all 27 proved impossible, via an 'enhanced cooperation' procedure, which requires a minimum of nine countries to agree.

"There is nothing in the treaty that would limit such a mechanism to the euro area," said Commission spokesman Olivier Bailly, adding: "The final dimension is impossible to foresee at this stage".

The tax will be discussed when Sarkozy and German Chancellor Angela Merkel meet today in Berlin and at a meeting of the European Council in Brussels on 30 January.

Eurosceptic temptation

Cameron may see the political benefit of 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 eurozone members had met without Britain for years. He added that other EU states may eventually reject the 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.

"We are a lot better off outside the euro, with our own currency and our very low interest rates that we have right now," he said.

Britain's Deputy Prime Minister Nick Clegg, the Liberal Democrat leader, is to host 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.

Background

In September 2011 the European Commission proposed a financial transactions tax (FTT) – also known as a Tobin tax or Robin Hood tax – that would tax the exchange of shares and bonds at a rate of 0.1% and would tax derivative contracts at a rate of 0.01%.

The Commission estimated this would raise €57 billion in revenue each year, to be split between the EU and the member states. The tax, which would come into effect in 2014, would affect all transactions where one party is within any of the EU's 27 countries, according to a blueprint by the EU executive.

Last week, France's minister for European Affairs Jean Leonetti said the tax would be enacted this year on an intergovernmental basis, despite objections from some EU countries.

Timeline

  • 11 Jan. Official inauguration of the Danish EU Presidency
  • 30 Jan. Extraordinary EU summit on jobs
  • 1-2 March. regular EU summit. '17+6' group plus others expected to sign to new intergovernmental treaty putting in place the so-called "fiscal compact".
  • 25 May 2012: Regular European Council meeting.
  • 28-29 June 2012: Regular European Council meeting.
  • 1 July: Beginning of Cyprus EU presidency.
  • July 2012: Entry into force of the eurozone's permanent bailout fund, the European Stability Mechanism (ESM).
  • End 2012: Target date for completing ratification process of new treaty.

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