The European Union’s latest plans to boost its future budget have raised the hackles of the moneymen in the City of London.
The Commission wants to collect one percent VAT throughout EU member states. It also wants to collect a levy on all financial transactions and that has sparked fierce opposition, particularly from the UK.
London’s financial and stock markets form a major backbone of the UK economy. With fears of a banking exodus from the City towards Asia or the US, the prime minister’s office in London rejected the proposals as unrealistic, saying the EU should be tightening its belt like crisis-hit member states.
A ‘no’ from Britain’s pro-business Conservative premier David Cameron would be enough to sink the plan before it even gets off the ground.
One analyst believes the EU proposals are rooted in a desire to satisfy public disquiet about finance houses.
Jorge Núñez Ferrer from the Centre for European Policy Studies said: “When you hear in the news all the time, after everything that has happened, the banks are making profits and people are getting bonuses, when you say we will do something about that, we will reduce the way they operate with this tax, I think people can have a feeling about it.”
The idea of a VAT payment stems from the desire to increase the EU budget while at the same time reducing direct contributions from member states.
The one percent extra collected on top of national VAT rates would be transferred directly into European coffers.
The commissioner in charge says the measures could generate a combined 60 billion euros, taking the budget until 2020 up to nearly a trillion euros.
And so the battle lines have been drawn and the first stones tentatively thrown. Germany has joined Britain in voicing its opposition. The Dutch finance minister also said tax is a matter for national governments.