Several leading MPs have called on the Government to stand firm in opposition to a controversial new financial 'transaction tax' being levied by Europe, which they believe could seriously harm the competitiveness of EU financial markets globally and will have a negative impact on the City of London, reports Reuters.
The so-called EU Financial Transaction Tax (EU-FTT) is being levied by the European Union, although the controversial policy only has support from 11 nations.
The idea was first floated in September 2011 as a way of recovering money lent to financial institutions around Europe during the credit crunch and the subsequent Eurozone crisis.
The EU-FTT proposes to charge financial institutions 0.1% on transactions of shares and bonds and 0.01% on derivative contracts. Although the percentage rates are small, the huge sums traded in European financial markets every day means the tax could raise up to €57bn if implemented across all 27 member states.
The lack of total support has led to the 11 supporting EU countries, including France and Germany, going it alone to implement the tax in their regions. The tax will be implemented on financial transactions anywhere in the world where they involve EU-based financial instruments.
Although not directly affected by the tax, MPs are worried that the UK will still have to be involved in collecting the tax and that the UK would not enjoy the benefits of any revenues it does collect.
The EU Committee in the House of Lords has recommended a legal challenge to the tax, saying that little had been done to investigate its impact on non-participating countries.
"We exhort you to take urgent legal advice on the case for a legal challenge at the European Court of Justice," said Lord Harrison, the chair of the committee.