Dáil Éireann Debate, Wednesday - 1 February 2012
8Deputy Niall Collins asked the Minister for Finance his views on whether a financial transaction tax even if implemented at EU wide level would be damaging to the financial services sector here in view of the fact that Ireland competes with many centres around the world; and if he will make a statement on the matter. [5618/12]
View answer21Deputy Thomas P. Broughan asked the Minister for Finance his views on a proposed financial transaction tax; if he envisages this tax as part of the new package of measures to support the euro within the Eurozone States; and if he will make a statement on the matter. [1908/12]
View answerI propose to take Questions Nos. 8 and 21 together.
I have stated clearly in the past my view that any tax on financial transactions would be best applied on a wide international basis to include the major financial centres. If such a tax cannot be introduced on a global basis, it would be better if it were introduced on an EU-wide basis, as this would prevent any distortion of activity within the Union.
Our major concern is that if a financial transaction tax is introduced, it could affect the financial services industry, especially in the IFSC, and lead to some activities moving abroad. If, as some countries have proposed, the tax was to be brought in under enhanced co-operation arrangements, we would fear we could lose business to London, since the UK is strongly opposed to this initiative. In the past, certain financial activities moved to London when other countries enacted similar taxes.
The Commission is proposing that the financial transaction tax should be an "own resource" tax imposed centrally to fund the European Union and will be developing proposals in the context of the future of the EU budgets.
The current draft proposal is still being discussed at EU Council working party level and will be considered again by the Council of Ministers later this year. I have made clear our views, as has the Taoiseach, in discussion with our European colleagues.
I thank the Minister for his reply and welcome the substance of what he said. He clearly pointed out the implications for Ireland of such a tax being introduced and being effective here but not applying to our nearest neighbour, the UK. That is something which would be of great concern.
I trust the Minister and his colleagues are using their influence in Europe to ensure the eventual outcome of this will be to our satisfaction. When the delegation from the Joint Oireachtas Committee on Finance and Public Expenditure and Reform was in Germany last week, it was a recurring theme and many of the parliamentarians we met there were clearly very enthusiastic about the idea of a financial transaction tax. We know that France is going ahead unilaterally to implement one this year.
Will the Minister stick to his guns on the issue and ensure that whatever the outcome is at European level, it is favourable to Ireland and that we are not exposed to a situation where our nearest neighbour, an English speaking country with a very large financial centre, can pick up lost business which we will endure as a result of any decision at European level?
Yes, I will bear the Deputy's advice in mind. I think we are ad idem on this. It is also worth noting that there are various kinds of financial transaction taxes. The one that France says it will introduce in the summer is close to the stamp duty we already apply to share transactions. However, the one in the Commission paper is far more wide-reaching and, in my view, would be injurious to Ireland.
The Minister said that if the Commission's proposals were to take place we would see a leakage of jobs and revenue from the State, presumably to London. Has the Department of Finance carried out any research on what the impact would be if Ireland signed up to a financial transaction tax, while Britain remained outside? What would be the impact on jobs, revenue, GDP, and the financial services sector which makes up 3% of our GDP? If that research exists, can the Minister provide the information to the House?
Our information on the proposal is not precise enough to make those kind of fine calculations. It is true to say, however, that in general terms it would be injurious to Ireland, as there are 30,000 people employed in the financial services area here. It is hard to estimate because it depends on what activities the tax might apply to. In Ireland, at present, it is back-shop employment servicing the financial services industry, and there would not be a tax applying to those activities. We need to watch what transactions a proposed tax would apply to. Would it hurt existing employment, or would it stop the financial services industry in Ireland from upskilling to get into other more lucrative activities where higher skills and wages would ensue? Those are the present and future issues, so we are developing an information base for the discussions that will arise in Europe later this year.
Like Deputy Doherty, I think it would be quite important to get some facts and debate this matter more fully. However, I want to give the Minister the opposite advice to that of Deputy Michael McGrath for him to consider, which is precisely the argument that was put in the German Bundestag by the German finance committee members. They made the point that the one lesson we must learn from this crisis is the need to rein in the financial markets. The financial transaction tax is precisely a means of doing that. They argued that states which opt out on the basis of short-term advantage will suffer in the medium to long term because they will be more vulnerable to shocks in the currently extremely volatile - bordering on anarchic - international financial services sector. That is an important point for us to consider. If we all wait for someone else to jump, it will never happen and no action will ever be taken to have some level of regulation for states to clawback from the financial markets. We need an informed debate but, to be honest, my prejudice would be that we should join in with those who are trying to take action to regulate the financial services sector.
In principle, the Irish Government's position is that if this could be introduced through the influence of the G20 on a worldwide basis, that would be acceptable. It is not the principle of the tax we object to, but its uneven operation through which we would end up having a tax in Dublin but not in London. Employment activity and jobs would move from Dublin to London, so our objections are more pragmatic than principled. After what happened in recent years, there is a strong case to be made for some imposition to be placed on the financial and banking industry so that it would make a contribution to the resolution of what happened. It is the unevenness of the application, however, which will cost us jobs. I am in the business of creating and defending Irish jobs, so I am not going to write off jobs in the Dublin financial services centre - where there are good jobs and high employment - because they might move to London due to the implementation of a particular tax.
Our position is that worldwide it is a reasonably good idea and we can go with that. We can also live with the idea of 27 EU member states having a financial transaction tax. However, we cannot live with 17 states imposing it and Ireland having to apply it, so that there would be a tax in Dublin but no similar tax in London. That is our position.
