Exclusive: EU legal opinion opens door to Tobin tax on forex

Tue Mar 18, 2014 3:58pm EDT
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By Huw Jones

LONDON (Reuters) - Deals from the multi-trillion euro a day foreign exchange market could in principle be included in a tax on financial transactions, a legal opinion from European Union lawyers seen by Reuters said.

While effectively ruling out the inclusion of the vast forex market from a transaction tax proposal now on the table, it leaves the door open for the sector to be included later on.

Legal opinions from the bloc's lawyers in Brussels have heft and a previous one last September which questioned the legality of one aspect of the planned tax triggered a long delay and a fundamental rethink.

The tax is aimed at recouping "a fair and substantial contribution" from banks after the public money they received in the 2007-09 financial crisis.

Eleven countries from the EU's single currency area, led by Germany and France, are trying to reach an outline deal on a transaction tax by May.

Attempts to introduce a global or pan-EU tax failed due to opposition from countries like the United States, Sweden and Britain, the latter challenging the plan in the bloc's top court.

The legal opinion, dated 14 March, says that, in principle, including spot currency transactions in a tax "would not necessarily be incompatible with the free movement of capital".

Adding foreign exchange transactions to the existing proposal, however, would exceed the powers of member states to amend it, the legal opinion added.   Continued...

Indonesian rupiah notes are seen at a money changer in Jakarta, August 29, 2013. REUTERS/Beawiharta