UK seeks allies on eurobond tax

CHANCELLOR Gordon Brown will continue to try and kill a proposed EU withholding tax on eurobonds despite a 386-106 vote in favour of the new levy by the European Parliament in Strasbourg on Wednesday.

"The Chancellor has said he is not going to agree to anything that damages jobs in the City," a Treasury spokesman said after the vote.

Before using its right to veto the new tax, however, the Government will attempt to build a consensus against the proposal as it heads for consideration by the European Council of Finance Ministers, or Ecofin, this spring. "It's clear that it's not just Britain and Luxembourg that have problems with the directive, but that a large number of European states are uncomfortable with various aspects," said Simon Murphy, the Labour MEP who headed opposition to the tax in Strasbourg.

The German, French, and Italian governments are in favour of including eurobonds in the plan of Tax Commissioner Mario Monti to harmonise EU withholding tax policy. Deutsche Bank, Germany's largest bank, has gone on record in support of the tax - although it favours a 15 per cent tax rather than the 20 per cent proposed by by Mr Monti.

The Germans, French, and Italians say a uniform withholding tax without exemptions is necessary to combat income tax evasion in the EU. They say that only 10 per cent of the eurobonds are floated and traded in London are held by individuals while the rest are held by institutions and would not be affected by the new tax.

But City bankers claim that as many as 100,000 jobs would be put at risk, if the eurobond market decamped from London to Zurich or New York. They suggest that continental support for the plan stems partly from a wish to clip London's wings as Europe's pre-eminent financial centre.

Last week's vote in the European Parliament was not binding. The proposal for withholding tax harmonisation - including the eurobond ex- emption - will be decided by EU finance ministers.

Peter Holmgren, Sweden's co-ordinator for financial questions in Ecofin, said: "The Parliament has a right to express its will. But tax matters are in the hands of governments." He added: "There is a long way to go before any agreement on this issue can be reached."

Four other EU governments have also expressed reservations about the withholding tax proposal, according to Mr Murphy: the Netherlands, Austria, Denmark, and Spain.

But Katrina Scak Nielsen, the Danish official responsible for co-ordinating policy between Brussels and Copenhagen, backed off from supporting Britain's position. "What Danish politicians say individually may differ from the Danish government's official position," she noted.

Nikolaus Berg, an official at the Austrian trade commission in London, took a similar line. "The banking sector in Austria wouldn't be happy with the plan," he said. "But at the federal level it's still under consideration."

But as the backroom jockeying began for a decision which the EC wants by the end of the year, the Treasury struck a defiant note, threatening to use Britain's veto to block the directive if an exemption for eurobonds is not included.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
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

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower