James Forsyth

Resisting an EU tax on financial services

Resisting an EU tax on financial services
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The prospect of taxes being levied directly by the European Union is one of those stories that pops up on a fairly regular basis. It is never likely to actually happen as national governments won’t want to cede the power of the purse strings. But the great Hamish McRae makes a very good point about the taxes that the EU wants to levy in his Independent column:

‘The two areas the EU wants to put taxes on, banking and air traffic, would hit the UK particularly hard. Financial services are the UK's largest export industry, with net exports (ie exports minus imports) of £33bn last year, more if you add in associated professional services. We are by far the world's largest net exporter of such services. We are also home to the largest international airport, Heathrow, and the largest international air hub. More people fly in and out of London than any other place on Earth.

So you might want to ponder why the EU should choose those two industries as its first targets for direct taxes. Fortunately, Germany is home to Europe's number two international airport, Frankfurt, and has a huge (though less export-oriented) banking system. So we have Europe's other paymaster shooting alongside us.’

Taxes on financial services are the most politically acceptable form of taxation at the moment for obvious reasons. But given that Britain has by far the largest financial services sector in the EU, any attempt to tax them at a European level will hit this country particularly hard. Indeed, Open Europe reports that FT Deutschland has calculated that a tax on financial transactions would make the UK the largest net contributor to the EU budget. London must hold the line.