A U.K. House of Lords panel said the government should reject the European Commission’s proposed financial-transaction tax, as it may pose a “severe threat” to the City of London.
The proposal is “wholly impractical and unworkable,” and would have a “disproportionate” impact on the U.K. by hurting London’s financial center, lawmakers from Parliament’s upper chamber said in the report published in London day.
“The government should absolutely not agree to the proposals in their current form,” Henry Harrison, the panel’s chairman, said in a statement. “There is huge uncertainty about the impact of any financial-taxation proposal on the U.K.”
Britain has led opposition to the tax, which Chancellor George Osborne has called “a bullet aimed at the heart of London.” The plan, backed by France and Germany, would tax stocks, bonds, money-market instruments and derivatives at source, including at banks, hedge funds and insurance companies.
As well as having a “disproportionate” impact on the U.K., the tax would harm the European Union economy as a whole, the Lords report said. It also criticized the proposal as “flawed” as it wouldn’t pave the way for the tax being applied globally.
Even if the U.K. rejects the tax, its implementation may still cost British-based companies as much as 22 billion euros ($35 billion) a year and cause 4,500 job losses, according to a Feb. 6 report by Ernst & Young LLP’s ITEM Club.
“The government needs to assess how we would be affected if the proposals are taken forward by some or all euro-area member states as a matter of urgency so that it can argue with conviction and contribute to the debate,” Harrison said. “This is an issue that we just can’t afford to ignore.”