Setback for EU financial-transaction tax plan

A plan to tax financial transactions in 11 European Union member states from 2014 is illegal, the bloc’s lawyers have concluded, in what could be a final blow to the measure as proposed.

The opinion is not binding, and Germany – which backs the tax aimed at making banks pay governments about 35bn euros a year after receiving taxpayer aid during the 2007-09 financial crisis – said it still wants swift introduction of the levy.

But the conclusions of the 14-page legal opinion will make it harder to push the measure through in its current form, particularly since it is already fiercely opposed by several EU members including Britain, the bloc’s largest financial centre.

The European Council’s experts said in the document that the tax – to be introduced jointly by 11 European Union member countries – exceeds the member states’ jurisdiction, may infringe on provisions of EU treaties and may have discriminatory effects on countries not taking part.

EU finance ministers will consider the conclusions and decide whether to scrap the idea, refine the proposal or chose a simpler levy such as the stamp duty Britain imposes on shares.

Britain and 15 EU member states refused to support the transaction tax proposal, raising questions about how it would work with only some members participating.

Germany, France, Italy, Spain, Austria, Portugal, Belgium, Estonia, Greece, Slovakia and Slovenia were planning to adopt the tax on stocks, bonds, derivatives, repurchase agreements and securities lending.