Tuesday, 2 July 2013

Questions (132)

Patrick Nulty

Question:

132. Deputy Patrick Nulty asked the Minister for Finance the reason he continues to oppose the introduction of an EU wide financial transactions tax. [25453/13]

View answer

Written answers (Question to Finance)

As I have previously stated, Ireland's position is that a Financial Transactions Tax (FTT) would be best applied on a wide international basis to include the major financial centres. If it cannot be introduced on a global basis, it would be better if it were introduced on at least an EU-wide basis to prevent any distortion of activity within the Union. This is in line with the Commission’s desire that the tax should be applied on a global basis. Such an approach would avoid the danger of activities gravitating to jurisdictions where taxes are not levied on financial transactions. The FTT that is currently being discussed at EU level is not an EU-wide FTT – 11 Member States are considering adopting an FTT by way of enhanced cooperation. Therefore our position has not changed. I have also previously indicated Ireland’s principled opposition to dealing with tax measures under “enhanced co-operation”.

An FTT could impact the financial services industry, especially in the IFSC, and lead to some activities moving abroad, particularly if it was not introduced on an EU wide basis.

An FTT could affect transactions in Irish Government bonds, including in the secondary market, and may also affect the ECB’s ability to give effect to its own monetary policy via the repurchase (“repo”) market. A significant number of countries have also raised this point in respect of their own debt management. Members of the Economic and Financial Committee Sub-Committee on EU Sovereign Debt Markets have recently stated that the introduction of the FTT would have a significantly negative effect on Sovereign Debt Markets and may impair the good-functioning of secondary markets for sovereign debt resulting in reduced liquidity, reduced investor demand and therefore higher financing costs for States. The European Investment Bank (EIB) has also expressed concerns and has suggested that serious consideration be given to the general exemption of all transactions on sovereign bonds, EIB bonds and bonds issued by Multilateral Development Banks from the scope of the FTT.

We are also concerned that the Commission’s own projections are that an FTT could reduce EU growth and raise the cost to ordinary, non-financial companies for their use of financial products. Both these aspects would be harmful to EU recovery.

If Ireland were to participate in the FTT it would require us to abolish our current tax on financial transactions, a Stamp Duty on transfers of shares in Irish incorporated companies, which currently stands at 1%.

One of the Commission’s aims in introducing an FTT was to ensure that the financial sector makes a fair contribution to the cost of the crisis. Ireland is committed to the principle that the banks will contribute to the cost of State’s support – the banks have been charged for the Government’s guarantee of their liabilities and the NAMA Act provides for a surcharge on the banks should NAMA result in a loss for the taxpayer. The Central Bank and Credit Institutions (Resolution) Act 2011 provides for the introduction of such a levy on authorised credit institutions, to be paid into a bank resolution fund.

The draft Proposal for a Council Directive implementing enhanced cooperation in the area of financial transaction tax is currently being discussed in the relevant Council working group. As the Deputy is aware, Ireland held the Presidency of the EU from January to June 2013 and during our Presidency we aimed to progress this file as transparently and inclusively as possible. The first read-through of the draft directive is not yet complete, further amendments to the text are likely and it is unclear what the final form of the Directive will be.

As of 1 July, Lithuania has assumed the Presidency of the EU. Ireland intends to fully contribute to future Working Party meetings. We will continue to monitor discussions on the FTT to ensure the compatibility of any proposed measure with the internal market and with existing taxes on financial transactions, including our Stamp Duty; and with a view to protecting our existing financial services business.

The Deputy may be aware that the UK has challenged the legality of the decision of 22 January 2013 of the Council to authorise enhanced cooperation on a common framework of FTT and the scope and objectives of the initial Commission proposal.