UK holds out against Robin Hood tax

By Ian Dunt

The UK is set to prevent the European Union setting up a financial transaction tax out of fears it will disproportionately affect London.

The EU Commission proposed the tax – which would raise around £50 billion a year from banking transactions – but it cannot pass the measure without British support.

It is thought that about 80% of the tax's revenue would come from London, because of its role as a banking centre.

Comment: In the name of Greece, tax the banks

Comment: Taxing the City will make the crisis worse

Treasury ministers are also concerned the tax would drive transactions away from the EU and that it would be prohibitively expensive to implement.

Supporters of the tax say it would go a small way to ensuring the banking sector pays for the crisis it created, rather than having the full weight of the burden fall on European taxpayers.

Surprisingly, they are backed by many share dealers, because the tax would replace existing stamp duty.

France and Germany have led calls for the tax, with Austria, Belgium, Spain and Norway also expressing support.

Labour wants movement on the issue as well, but the Treasury says it will only accept a transaction tax if it is implemented globally.

The proposal would see a financial tax of 0.1% on all transactions between institutions when at least one party is based in the EU.

If the UK continues the hold out the tax would only be imposed at the eurozone level, where it would be far less effective.