UK loses bid to counter plan for EU financial transactions tax

The UK lost a bid to counter plans by 11 European Union nations for a common financial transactions tax, after the bloc’s top court said it was too soon to rule on the legality of the move.

The European Court of Justice rejected calls from Britain for the annulment of a January 2013 decision authorising talks on the tax plan by the coalition of countries, saying that it can’t prejudge the outcome of negotiations.

The ruling means the UK will need to decide whether to embark on a further court challenge against the tax, if a blueprint for the measure is adopted by participating nations.

“The UK accepts that its action might be regarded as premature,” the ECJ said in a statement. Britain made the challenge as “a precaution” that preserves its right to take further legal steps against the tax plan, the court said.

The court ruling comes before any deal has been reached on the design of the tax by participating countries. EU finance ministers allowed the coalition of countries a year ago to move forward on developing a common financial- transaction tax, based on a draft plan expected to produce as much as €34 billion a year, including €11.8 billion in Germany.

EU politicians have said the rule is needed to bolster financial firms’ tax contribution and rein in high-frequency trading.

Today’s decision by the ECJ “is not entirely surprising given that it’s still too early to know exactly what the final version of the FTT will look like,” Florian Lechner, a tax partner at Linklaters LLP, said in an e-mail.

The UK Treasury said that it filed the case to guarantee that it would be able to challenge any final tax at a later date. “Today’s decision confirms the U.K. will be able to challenge the final proposal for a Financial Transaction Tax if it is not in our national interest and undermines the integrity of the single market,” the Treasury said in a statement.

Bloomberg