Opportunity costs to the United Kingdom of non-implementing the European financial transactions tax
In September 2011 the European Commission published a proposal for the implementation of a general financial transactions tax (FTT). However, no EU-wide consensus on the implementation of a FTT could be reached. In particular, the government of that EU country with the by far highest trading volumes, the UK, rejected the FTT. As a consequence, the governments of 11 member countries decided in October 2012 to introduce the FTT in their respective jurisdictions utilising the "enhanced cooperation procedure". These countries are Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain (in the following abbreviated as FTTCs). The proposed study shall estimate how much revenue the UK will lose by not joining into the new European FTT. These FTT revenues foregone to the UK will be substantial since the proposal of the EC is based on the residence principle for taxing financial transactions. According to this principle, taxation will take place in that EU member country where the financial institution which is party to the transaction is established, independent of the location of the transaction. As a consequence, trades between British financial institutions and financial institutions established in one of the 11 FTTCs will still be taxed when the 11 national FTT goes ahead, but money that could be flowing to the UK Finance Ministry will instead go to European governments. This is true for transactions not only carried out in the City of London but also on any other market in the world economy. In addition, the study will estimate the overall (hypothetical) earnings of the UK if she introduced the tax according to the EC proposal.