Eversheds says the ECJ ruling against UK challenge to FTT could weaken its EU position

Ben Jones, tax expert at Eversheds, has commented on the anticipated release of the decision of European Court of Justice (ECJ) in respect of the legal challenge raised by the UK to the proposed EU financial transaction tax (FTT).

Jones said that rather than provide a definitive outcome, the court’s decision is likely only to mark another stage in the lengthy development of the proposed EU FTT.

He added that given the shortened process used by the court to reach its decision, coupled with the fact that the underlying proposals for the FTT are still in draft and subject to ongoing changes, it is anticipated that the ECJ will neither rule in favour or against the UK, only that the challenge raised was premature.

‘Such a ruling would not be problem for the UK as it should be allowed to resubmit its challenge once the final form of the FTT has been determined. This may not be necessary if ongoing negotiations on the scope of the tax addresses the UK’s concerns regarding its extra-territorial effect,’ said Jones.

‘However, if this problematic feature remains, the UK would appear to have good grounds to resubmit its legal challenge. EU law states that the enhanced co-operation procedure being used to implement the FTT must respect the rights of non-participating member states and must not undermine the internal market — the UK government believes these requirements would not be met since the tax could be payable by residents of non-member states and must inevitably lead to the distortion of competition within the EU.

‘The real problem for the UK government will be if the court rules against the substance of the UK challenge. This would be a significant blow for the UK government, undermining not only its challenge to the FTT but also weakening its position in the EU generally.’

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