European Union lawyers have vetoed a controversial new tax that would have imposed levies on financial transactions. The legal opinion, which the European Commission published yesterday, says that the financial transaction tax (FTT), approved by the European Parliament in July 2013, would exceed member states’ tax powers and is incompatible with the EU treaty.

The opinion represents a set back for the 11 EU member states that signed up for the new tax, which aims to discourage risk-taking by taxing transactions of shares, currencies and bonds. It is strongly opposed by the UK government which in April 2013 began a legal challenge in the Court of Justice of the European Union.

The BBC reports that CBI head of financial services and corporate governance Leo Ringer said: ‘This opinion recognises that the FTT would have damaging implications for growth, jobs and investment beyond the member states involved, so now is the time to draw a line under this flawed proposal. It also makes clear that moves towards further integration between a number of EU countries can’t be taken forward if they impact on the rights of all member states, unless all states affected have signed up.’