Financial Transaction Tax Will Instantly Hit Savers by £3bn

The Financial Transaction Tax will instantly lose savers £3bn as the household stock and bond holdings would decrease in value on the amount of tax paid.

According to research by consultancy London Economics, Britain's savers will face more misery, in already a low interest rate environment, as the levy on personal savings will be immediate, even though the UK is not participating in the FTT.

"In countries that plan to introduce the tax for example, the impact is in the order of €80bn (£66bn, $110bn) in Spain to €205bn in Italy, representing a loss of up to 16% of the value of the assets being taxed," said the report.

So far 11 out of 28 Eurozone members, including France and Germany, have signed up for the FTT.

It is expected that a stock or bond trade will receive a 0.1% tax rate, while a financial derivatives contract will receive a charge of 0.01% for every transaction.

The plan is similar in style to a so-called 'Tobin Tax', named after the economist James Tobin who originally conceived the idea in 1972 to apply to currency trading. Other adoptees of the proposal include Italy, Spain, Austria, Portugal, Belgium, Estonia, Greece, Slovakia and Slovenia.

Despite Britain opting out of the scheme, the UK mounted a legal challenge against the FTT proposal specifics in April last year.

One of the UK's central arguments is that it would impede national sovereignty by forcing it to collect tax for other member states.

It also argues the UK would be disproportionately affected because of London's dominance as a global finance hub.

Around this time last year, a London Economics study, also commissioned by the City of London Corporation, revealed that Britain faces paying £4bn more in borrowing costs as a result of the FTT, even if it does not sign up to the controversial plan.

However, it is tipped that France and Germany is looking to renew support for the FTT.