Commenting on the announcement (PDF 164.11 KB) today that the EU Court of Justice has rejected the UK’s challenge to EU Financial Transaction Tax on procedural grounds, Chris Morgan, Head of Tax Policy at KPMG in the UK, said:
“The UK’s challenge to the Financial Transaction Tax has been rejected today but the battle is far from over. The UK admitted in its arguments that the challenge may well have been premature and in fact it was rejected on these grounds."
“The FTT is proposed to be introduced by an EU Directive which only applies to states who agree to be bound by it under the so called Enhanced Cooperation process. In 2013 the EU Commission had issued a proposal under which 11 member states would be permitted to adopt this process."
“At the core of the UK’s objection lay the potential impact on UK financial institutions (insurance companies and asset managers as well as banks). The draft proposals would have imposed the tax on UK financial institutions, and created a cost for the UK, even though the UK had decided not to implement the FTT. The Court did not comment on the merits of the UK’s objection but pointed out the elements the UK complained of did not form part of the Commission’s decision allowing the other member states to proceed with the enhanced cooperation. At this stage the UK could only challenge the issuing of that decision and, from a procedural point of view, that decision was issued correctly."
“The Court did not in any way comment on the merits of the UK’s challenge to some of the proposal for the FTT. The enhanced cooperation process has been moving forward again in recent months, and it seems possible, depending on the outcome of that process that there may be a further UK challenge to an EU FTT. Whether this happens, and the prospects of success, will depend on the scope of the charge and its impact on states such as the UK that have chosen not to participate.”
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This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.