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Britain launches legal challenge to EU finance tax

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Britain launches legal challenge to EU finance tax

City of London - Photo David Iliff

(LONDON) - The British government has launched a legal challenge against plans for a European financial transactions tax to be adopted by 11 EU states, finance minister George Osborne said Friday.

Osborne said an application had been lodged at the European Court of Justice against the Financial Transaction Tax (FTT).

While the tax would be adopted by eurozone countries it would affect investors worldwide.

Britain is not adopting the FTT and opponents of the tax fear it would be levied on British firms trading with businesses in participating states, including France and Germany, which they say would domestic growth.

"The UK launched a legal challenge to the European Commission's proposal for a financial transaction tax," Osborne said.

"We're not against financial transaction taxes in principal but we are concerned about the extra-territorial aspects of the Commission's proposal and I think that concern is shared by some other countries."

The FTT imposes a tax of 0.1 percent on a trade in shares and bonds, and of 0.01 percent for derivative instruments.

The European Commission has said that if any of these investments originate in one of the 11 FTT states, they can be taxed wherever they are traded, giving them a global reach.

The British government led opposition to the original 2011 proposal because of concern over its impact on London's financial centre.

After failing to get support from all 27 EU states, France and Germany forged ahead with the tax under the EU's Enhanced Cooperation procedure. They were joined by Austria, Belgium, Estonia, Greece, Italy, Portugal, Slovakia, Slovenia and Spain.

The European Commission says its proposals, which are subject to approval from the European Parliament and EU leaders, should raise 30-35 billion euros each year.

However a spokesman for Britain's Treasury said there were fears a European tax would "hit people's savings and pensions and hit jobs and growth.

"While we will not participate in a Europe-only tax, we have also said we will not stand in the way of other countries, but only if the rights of countries not taking part are respected," the spokesman said.

The European Commission said it remains "confident" that the plans were legally sound.

"The Commission's view is that there is no extra-territoriality to the FTT," a spokesman for the Commission said. "It is fully in line with international law and the principles of the single market.

"Transactions will only be taxed if there is an established economic link to the FTT-zone, in a way that is fully compatible with the principles of cross-border taxation."

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