(July 25, 2013) — The UK government has been told to carry out a proper feasibility test for the financial transaction tax (FTT) by one of its parliamentary committees, driven by concerns the Treasury has rejected it for simply being too difficult.
In a statement regarding the implementation of the much-reported Kay Review (a paper designed to help reinvigorate the UK equity markets), the Business, Innovation and Skills (BIS) committee told the government to issue a formal feasibility study into the FTT’s impact, rather than simply assume it will be too impractical to implement.
“We found some support for the concept of a FTT, but concerns about the practicality of its implementation,” BIS committee Chairman and Labour MP Adrian Bailey said.
“Something being difficult is not sufficient justification for rejecting it out of hand. The government should assess the likely impact of the introduction of a FTT and how the obstacles to its implementation can be overcome.”
This view appears to sit at odds with that of Chancellor George Osborne, who has been seen vociferously campaigning against the FTT applying to UK institutions in recent months.
The original proposals for the FTT would have seen a 0.1% tax of the value of share and bond transactions and 0.01% on derivatives imposed where any of the transaction is made in the 11 European countries that have agreed to participate in the move.
But this was widely derided by lobbying groups, the UK government, the US Fed, and France’s central bank governor Christian Noyer, resulting in the European Commission acceding that a watered down version was more likely.
Under the most recent proposals, the tax would be rolled out more slowly than scheduled, its annual levy reduced, and could even see derivatives being exempted completely.
The result of all these changes would be a drastically reduced haul of cash–the FTT could end up raising just a tenth of the €35 billion that was original stated.
Related Content: Controversial European Tax to be Watered Down and Actively Managed Pension Funds Could Be Reduced By 8% Under FTT Proposals