The Law Society has lined up with the UK government in attacking the 'Robin Hood' tax on financial transactions being proposed by 11 EU member states.
The controversial tax will be discussed at ministerial level for the first time at tomorrow's meeting of the EU Economic and Financial Affairs Council under the Greek presidency of the EU.
Greece is one of the 11 EU members states to back the introduction of a financial transaction tax (FTT) through the EU's enhanced cooperation procedure, which enables a new initiative to be advanced in the absence of unanimity.
The UK has strongly opposed the measure, which chancellor George Osborne has described as 'poorly designed, badly-timed and... unlawfully extraterritorial'.
In a letter to European finance ministers, the Law Society's chief executive Desmond Hudson (pictured) says that the proposal does not sufficiently respect the rights of countries that have chosen not to participate.
Reiterating concerns raised by the Society last year, Hudson says that the FTT is designed in a way that financial entities based in non-participating countries, such as the UK, would still be subject to the tax for a wide range of transactions, including transactions that do not necessarily have a genuine economic link to a participating member state.
Hudson said: ‘The Law Society fully respects the competence of those 11 countries that have chosen to introduce a financial transaction tax. However, regardless of the potential pros and cons of the tax, we firmly believe that any legislation should respect the EU treaties and the decision by a majority of countries not to participate.
‘The point is that the extraterritorial effects of the proposed tax would in effect force a degree of participation on those countries.’
Gary Richards, chair of the Law Society’s tax law committee, said that the tax would depart from the normal rule that each party to a transaction is responsible for their own liabilities.
‘To prevent avoidance, the European Commission has proposed that in principle each leg of a transaction is subject to the tax and that each party is jointly and severally liable to pay. Essentially, this means that the costs will be much higher as is the likelihood that the tax will be passed onto non-financial parties, such as businesses, and pension savers.’