EU Tobin Tax: legal storm escapes teacup

The FT headlines today with a leaked opinion from the EU’s own legal service, launching a blistering attack on the EU “Tobin Tax” proposal’s extra-territorial presumption. The levy’s key and most controversial feature is the “residence principle” which seeks to tax any trades by anyone with any entity that is headquartered within the 11 subscribing states. Although only advisory in nature, the opinion concludes that such broad scope is ultra vires, discriminatory, essentially unworkable and probably illegal. This uncharacteristically decided opinion is likely to deal a severe blow to the already-stalled €35 bn. p.a. proposal, although the final outcome of internal EU machinations is always uncertain. Algirdas Semeta, the EU Commissioner for Tax, replied via Twitter that “FTT is legally sound and fully complies with EU treaties and international law”. It is likely that any successor to the tax will be in the less-ambitious form of a stamp duty, levied on a local basis. The trenchant Lombard column in the FT raises the interesting possibility that such a tax may actually end up being less than current UK stamp duty, inevitably leading to accusations of discrimination and leading to intense lobbying by the City to be taxed by Europe.