Britain yesterday insisted that German and French plans for an EU-wide tax on financial transactions must be applied across the world to be effective.
The proposal by German Chancellor Angela Merkel and French President Nicolas Sarkozy followed talks between the pair in Paris on Tuesday aimed at restoring confidence in the debt-hit eurozone, to which Britain does not belong.
The Treasury said the British government would “engage” with other nations over the proposals.
However a spokesperson also insisted that “any financial transaction tax would have to apply globally – otherwise the transactions covered would simply relocate to countries not applying the tax.”
Industry body the British Banking Association agreed.
“We need to ensure that if a transaction tax is being actively considered by policymakers, it is being considered by policymakers around the world, otherwise the consequence could be distortion of the markets which ultimately loses business and impacts on economic growth,” a BBA spokesman said.
The Maltese government’s position is also that the introduction of a tax on financial transactions should be “on a level playing field” among all the EU member states and other financial jurisdictions.
Meanwhile Deutsche Boerse, which operates the Frankfurt stock exchange, said the tax would “be a gift to non-regulated financial markets and products.”
The Federation of German Mutual Banks added that “it is to be feared that speculative transactions as well as the income sought from the financial transaction tax would migrate to other financial centres.”
In addition, such a tax “must not be allowed to have a negative impact on normal hedging activities on foreign exchange markets which are needed by companies in the real economy,” the BVR said.
Germany’s main banking federation BdB called the tax proposal a distraction from the causes of the current financial crisis, and several observers said the proposal appeared aimed at domestic audiences in Germany and France.
Deutsche Boerse stressed doubts about the regulatory and fiscal impact of a broad-based tax scheme, and warned that it would be difficult to track all transactions.