British MEPs hope to muster opposition to the tax by passing non-binding amendments to exclude international bonds from efforts to harmonise EU taxes. "If it happens, Switzerland will be a huge beneficiary," said Viscount Bridport, chief executive of the Geneva-based bond broker Bridport & Cie.
Under the European Commission's proposal, a 20 per cent tax would be levied on interest income in one European Union state paid to residents of another EU state. London has a near monopoly on the $3,300bn eurobond market, currently free of withholding tax. The Corporation of London estimates that the eurobond market employs 110,000 in the City.
But Stanley Yassukovich, chairman of the Brussels-based Easdaq exchange for smaller companies, maintains the tax plan "is not a UK issue, it's a European issue". He said implementing the plan would be a sign that the EU "isn't prepared to exploit its position as a world financial centre".
"The eurobond market is a business we are lucky to have in Europe," he added.
EU laws permit Gordon Brown to veto the tax. But this could strain relations with other member states at a time Tony Blair is trying to build bridges.
The vote tomorrow or Tuesday on 89 amendments to the tax bill before the economic affairs committee will set the stage for a full vote in the parliament. Officials said the outcome was too close to call. While the parliament plays only an advisory role on tax matters, opponents of a eurobond withholding tax hope its disapproval could sway EU finance ministers ahead of the decision in December.
"The reality [if a eurobond withholding tax is imposed] is the market will move from London either to New York or Switzerland," said Lord Bridport. He wrote to the Chancellor urging him to "convince our European friends of their short-sightedness".
EU Commissioner Mario Monti, the author of the tax, said the tax would hit only 10-20 per cent of the eurobond market, making it "only a very limited problem".Reuse content