Brown's stand puts Eurobond tax at risk, say EU ministers

THE EUROPEAN UNION admitted yesterday that its plans for a community- wide savings tax were in deep trouble after Britain threatened to block the measure because of fears about its impact on the Eurobond industry.

"I agree that problems are very deep and difficult," the Finnish Finance Minister, Sauli Niinistoe, current chairman of the EU finance ministers' council, said after an informal weekend meeting.

Finance ministers had hoped to push ahead with the levy at this weekend's meeting in Turku, Finland, where Britain submitted proposals aiming to exempt the London-based bond industry.

Britain fears the tax would drive the multi-billion-dollar business to centres outside the EU, wiping out thousands of jobs in London's financial district. British proposals were spurned by other countries, and the EU looked set to miss its own deadline to approve the levy at a December summit in Helsinki.

Mr Niinistoe refused to give up hope, but he said the Finnish presidency faced an uphill struggle to produce a breakthrough. "It will be a busy two, three months to try to tackle them [differences over the tax]," he said. He would not comment on what compromise seemed possible.

Britain made clear that nothing short of two alternative solutions that it presented would be good enough. It said the EU should either exclude most Eurobonds from the tax or agree a list of saving instruments that could be taxed.

"The issue for us is not when the discussions conclude and how," the Chancellor, Gordon Brown, told reporters. "The issue for us is what happens to our particular proposal, and we're insisting on that. We will not accept this directive if it damages the interests of the City and the Eurobond markets and I've made it clear that I would not back down on these issues."

His EU colleagues reacted with disappointment, saying acceptance of the proposals would be unfair to small investors.

"This [British] idea cannot be explained to our citizens," the German Finance Minister, Hans Eichel, said. "We can't go home with a deal that exempts the big investors and taxes the small ones."

The tax is the most controversial part of a long-delayed package of measures aiming to smooth out distortions in the single market. The European Commission has proposed a 20 per cent withholding tax on interest from savings and investments by non-residents to curb cross-border tax evasion by EU citizens, who hold an estimated 5 per cent of total bond holdings.

Mr Niinistoe said earlier that the British paper would be studied by experts, while Luxembourg would produce a separate proposal on protecting the mutual funds industry from the measure as well.

Diplomats say Britain will not give up its hardline position because almost all the Eurobond business is based in London. Britain doubts the EU will force non-EU financial centres, such as Zurich, to impose the EU regime on their own financial industry, which would prevent capital flight out of the EU. However, the outgoing EU tax commissioner, Mario Monti, said talks with non-EU members Switzerland and Liechtenstein had been promising.

He also said that a sudden inflow of capital to Switzerland could put unwelcome upward pressure on the Swiss franc, hurting the country's economic prospects.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Ramsay Bolton in Game of Thrones
tvSeries 5, Episode 3 review
News
peoplePair enliven the Emirates bore-draw
Arts and Entertainment
tv
News
Britain's opposition Labour Party leader Ed Miliband (R) and Boris Johnson, mayor of London, talk on the Andrew Marr show in London April 26
General electionAndrew Marr forced to intervene as Boris and Miliband clash on TV
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Business Analyst - Financial Services - City, London

£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence