EU lawyers have announced that the Commission's plan to impose a financial transaction tax (FTT) would contravene its own laws, reports the BBC.
The EU financial tax was devised to generate revenue from financial transactions across Europe and in doing so to discourage risk-taking by traders of shares and bonds.
The UK was staunchly against the tax, believing it would stifle the competitiveness of EU financial markets and especially the City of London, the jewel in the UK's economy.
Although the UK was planning to opt out of the tax, it would still be affected as much of the UK's financial trade is conducted with the EU and these transactions would be hit by the proposed levy.
However, now the EU's own lawyers have criticised the proposals, saying in their current form they would be illegal.
A 14-page document compiled by lawyers for the 11 countries planning to introduce the tax said doing so would be beyond the powers of the 11 countries and would also contravene EU treaty law.
Although the document is a blow to the proposal, the lawyers stress it is only their opinion and the 11 countries are free to press ahead with the plans.
Opponents hope the 11 countries will see that going ahead with the tax will simply lead to legal challenges that opponents now feel ever more likely able to win.
The UK has already launched a legal battle against the proposal with the European Court of Justice.
The Confederation of British Industry, a UK lobby group, is against the proposal. Their head of financial services, Leo Ringer, told the BBC: "This opinion recognises that the FTT would have damaging implications for growth, jobs and investment beyond the member states involved, so now is the time to draw a line under this flawed proposal."