By Daniel Hunter

The proposed Financial Transaction Tax is a “tax on growth” and will hinder economic recovery in Europe, the CBI, manufacturers’ organisation EEF and the British Bankers’ Association have stated in a letter to European leaders.

The letter, sent to European Commission president Jose Manuel Barroso, European Council president Herman Van Rompuy and ECOFIN Council president Micheal Noonan, also stresses that it would mean small businesses would find it harder to get funding.

“We believe that the FTT is fundamentally a tax on growth and should be viewed as a major risk to Europe’s ability to recover from the current economic problems it faces. By the EU’s own figures this tax would lead to a reduction in economic output,” it reads.

“At a time when we should be completely focused on economic growth and creating new jobs, this tax could have the opposite effect by increasing the cost to businesses of raising funds, making it harder for them to expand in the future.

“In particular, the FTT would make it more difficult for small businesses to access the funding they need as they are more reliant on bank borrowing to finance future growth.“

The business leaders go on to warn that the tax would “damage the competitiveness of European businesses in global markets” and will end up harming consumers rather than financial institutions themselves.

The letter continues: “The FTT will ultimately not be a tax on financial institutions, but instead on the consumers of their services. It will very quickly feed through into higher costs for households and businesses since virtually every aspect of their financial activity will be impacted.”

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