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EU countries to probe Brexit effect on financial tax

Ten European countries have agreed to study the impact of Brexit on plans for a financial transactions tax (FTT), Bloomberg has reported.21 Sep 2017

European Commission spokeswoman Vanessa Mock also told Bloomberg that "ministers agreed on a way forward to progress on the FTT proposal on the basis of the agreed core engine and finding a solution for pension funds".

However, tax expert Eloise Walker of Pinsent Masons, the law firm behind said: "The FTT has been mired in politics since it was first proposed. Pausing while they consider Brexit is unlikely to make the process move faster, or result in swifter agreement between the participating countries, so while we have to wait and see what happens next, it is a little early for British business to quake at this news."

The UK government and the EU have argued for years over the latter's plans to introduce a FTT. Under the EU plans, the FTT would apply where financial instruments such as shares, bonds, securities and derivatives are traded between banks, and where at least one party to the transaction is established in a participating EU member state regardless of where the transaction itself takes place.

The EU FTT was first proposed in 2011, with details released in 2013, but its implementation has been repeatedly delayed.

The current negotiations only include 10 countries because some member states did not support a previous proposal from the Commission. Eleven countries agreed to use an 'enhanced cooperation' process that can be used as a last resort where some member states wish to proceed with a plan that not all EU countries agree with. Estonia then dropped out, leaving 10 members.

In April 2013 the UK began a legal challenge against the proposals. The UK government claimed the tax would apply to UK firms trading with businesses based in a participating state even if the UK itself was not a party to the FTT. The EU's highest court, the Court of Justice of the European Union, dismissed the challenge as "premature".

The UK Labour party proposed a similar tax in May.