Cameron plans to let Europe take £21bn a year from the City … and we get nothing!
Big Four accountancy giant Ernst & Young say that the Government is planning to give away more than £21bn a year in tax revenue to other EU governments. The Daily Mail must be apoplectic. Eurosceptic MPs must be foaming at the mouth. Have Cameron and Osborne gone stark, staring mad? What on earth is going on?
It’s all about Cameron’s ham-fisted attempt to opt out of EU regulation of the City of London. Many people have remarked upon his failed attempt to veto the Franco-German treaty proposal at the December European summit. Now, on top of the veto that wasn’t, here’s the opt-out that isn’t.
By refusing to take part in the Commission’s proposed financial transactions tax, Cameron thinks he has protected his pals in the City of London from paying the tax. But he hasn’t. All he will do by opting out is make sure that the British people don’t benefit from the tax when the rest of Europe goes ahead with it.
Here’s how it works. The Commission’s plan for an EU-wide financial transactions tax would raise about €57bn a year. Because London is where most of Europe’s financial transactions take place, about 75% of that tax revenue would be raised from transactions in the City of London. Cameron thinks that if the UK refuses to take part, those transactions won’t be taxed.
But Ernst & Young have ‘spotted’ what the Robin Hood Tax campaign has been arguing for some time. The way the Commission is designing the tax, the transactions which will be taxable won’t be just those that take place in countries taking part, but any transactions carried out where one of the parties to the transaction is based in a country where the tax is introduced. So if France and Germany levy the tax, and just one party to a financial transaction is Deutsche Bank or Bank Paribas, the euroFTT is payable, even if the actual transaction takes place in the so-called duty free City of London.
What Ernst & Young have added to the Robin Hood Tax campaign’s analysis – they are accountants after all – is that they have worked out what Cameron’s early morning diplomatic faux-pas will cost the UK taxpayer. They estimate that of the 75% of transactions that take place in London, 60% involve at least one party based in the rest of Europe. If the UK was involved in the EU tax, that would mean the City of London paying £35bn into the Treasury. If the UK doesn’t take part in the tax, the City of London will pay £21bn in tax – but none of it will end up in the UK Treasury, it will all go to other EU member states. London’s financial fat cats will indeed save £14bn, but at a huge cost to the UK taxpayer.
There’s only one answer. Cameron needs to go cap in hand back to Brussels, and ask if the UK can rejoin the Robin Hood team.