UK Chancellor George Osborne has criticised the latest
proposal for a Financial Transaction Tax (FTT) for lacking
clarity over which derivatives will be included within the
levy, writes Jonathan Watkins.
Speaking at today’s ECOFIN Council meeting, the
UK Chancellor of the Exchequer once again slammed the tax, this
time highlighting the lack of detail surrounding the hedging
"There is no information on what derivatives are going to be
included," said Osborne.
"It is quite a big market.
"Is this going to apply to shares and derivatives issued in
all member states?"
A 0.01% tax is set to be applied to derivatives contracts by
11 participating EU member states which include Germany, Italy
The draft for the tax was proposed in February 2013, though
all EU members continue to debate the economic effects of the
charge with the UK joined by the likes of Sweden and Luxembourg
in being opposed to the charge.
Osborne said during the meeting, that members were today
issued with a document, despite an agreement on full
cooperation on the proposal between both participating and
He described the participating states as compiling the
proposal in secret.
"We get a piece of paper from the participating states
saying, 'oh this is what we are going to do’.
"We are entitled to a clearer explanation to what was agreed
Luxembourg’s representative also described the
document as 'extremely vague’, which
Sweden’s Finance Minister, Anders Borg, described
it as a 'proposal we cannot understand’.
Within the document issued to those attending the meeting,
the European Commission said it plans to phase in the tax, with
implementation on shares and derivatives representing the first
The UK has launched a legal challenge against the taxation,
and while it was initially rejected, it did pave way for a
future challenge over the extraterritorial impacts of the
"The European Court of Justice judgement makes it clear that
the UK or any other member state can challenge the final
transactions tax proposal," added Osborne.
"We will see the detail of what is proposed but we will not
hesitate to challenge."
Alexandria Carr, regulatory lawyer
at Mayer Brown, said that in light of the European
Court’s stringent rules, it was crucial for the UK
to challenge the tax when it did.
therefore, acted prudently in challenging the initial decision
that authorised the 11 member states participating in the FTT
to go ahead," she said.
do so could have resulted in the UK being told that any
subsequent challenge was too late, whereas a finding that this
challenge is too early will not prevent the UK challenging, if
necessary, any legislation that the 11 member states ultimately
The UK remains strongly opposed to the tax, with Osborne
previously describing it as a bullet aimed directly at the
heart of London.
Market participants have voiced concerns over the reduction
of liquidity as a result of the FTT, also known as the Tobin
A recent report by FOW though, showed that derivatives
trading in Italy has actually increased since the tax was
introduced, with volumes up by 79% in the nine months following
The main issues highlighted by those opposed to the tax are
the overall economic impacts on the European market, along with
the extraterritorial impacts on non-participating member