BRUSSELS, Feb. 15 (UPI) -- It's not in force yet but the hotly debated European financial transaction tax has divided the European Union, angered U.S. bankers and threatens jobs in competing business centers in London and 15 other countries that rejected it.
The revised FTT law, now before European Parliament, has introduced provisions that will affect firms in countries that are outside the 11-country zone that the new financial transaction tax regime will create.
London is most vulnerable because of the huge diversity of financial transactions passing through its financial center, the City. Experts predicted job losses, an unwelcome brake on an already slow economic recovery and deeper EU divisions than those caused by cash bailouts of the 17-country eurozone.
Disagreements over EU measures to stimulate recovery have triggered a political storm in Britain, which plans to have a referendum on whether to ditch the European Union altogether. The FTT is set to exacerbate those tensions because new provisions will act as a disincentive for traders to move transactions to London outside the 11-country FTT zone.
France and Germany lead the group and are backed by Austria, Belgium, Estonia, Greece, Italy, Portugal, Slovakia, Slovenia and Spain.
Britain and 15 other members that oppose the FTT include countries that either have financial centers or are trying to develop facilities and feel the tax will hurt their chances of reaching their goal.
The new proposals capture all financial instruments originating from a resident country. "So a Volkswagen share traded between banks in London and New York would be charged," the Telegraph said. "The charges will hit all sorts of companies, not just banks."
The tax, set at 0.1 percent for shares and bonds and 0.01 percent for derivatives, is aimed to raise the European Union's public finances and will apply to all transactions that can be traced to the FTT zone even when conducted outside the zone or even Europe. The European Union hopes to raise $40 billion-$47 billion a year but analysts see trouble ahead over the levy.
The FTT will apply to any transaction ordered or executed in relation to any financial product issued within the tax area or by a group or individual within it.
For example, a bank based in the United States would have to collect the tax if it acts for a European client seeking to buy shares in a U.S. company even if neither the bank nor the company has any link to the tax zone.
EU taxation Commissioner Algirdas Semeta called the tax proposals "unquestionably fair and technically sound."
Critics say the FTT is a nightmare waiting to be experienced and predicted that implementation and enforcement will create a huge bureaucracy. The European Union is already under fire allegedly for squandering taxpayer funds on wasteful bureaucratic operations in and outside Brussels.
The FTT's overarching application outside the European Union will discourage transactions across the European Union and will drive companies outside the region, critics say.
There are several candidates that would welcome business fleeing the European Union, including Istanbul, Dubai, Mumbai, Singapore -- and China in and outside Hong Kong.