The Government's position is that a Financial Transactions Tax (FTT) would be best applied on a wide international basis to include the major financial centres to prevent the danger of activities gravitating to jurisdictions where taxes are not levied on financial transactions. Notwithstanding this, the Government is not prepared to stand in the way of EU Member States that wish to work together to implement a Financial Transactions Tax and in this regard adoption of a decision formally authorising enhanced cooperation took place during the Irish Presidency of the EU in January 2013.
The proposal for a Directive from the European Commission in the area of financial transaction tax was published in February 2013. Ireland had many concerns about the proposal as drafted, not least of which were the potential impacts on, and the trading of, Irish Sovereign debt in the secondary market and in total, the potential negative impact on the liquidity of the financial sector as a whole. Members of the Economic and Financial Sub-Committee on EU Sovereign Debt Markets have 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.
Our concerns are widely shared amongst the Member States, including some of the participating countries. These concerns have led to the issuing of a communique by the participating Member States last week, announcing that they have agreed to implement a financial transaction tax in a progressive manner, with the first step being a charge on shares and some derivatives. However, significant technical and legal discussions will continue to be required at the Council Working Party before the text of the proposed Directive can be finalised. With this in mind, the targeted implementation date for the FTT has been rescheduled to 1 January 2016.
As the Deputy will be aware, Ireland already has a tax on financial transactions, a Stamp Duty on transfers of shares in Irish incorporated companies, which currently stands at 1%. It now appears that this will be the form of the initial tax measure that is being considered by the participating countries. This means that in effect these countries, some of which do not apply any financial transactions tax currently, are now considering a tax along the lines of that which already applies in Ireland, the UK and certain other countries. The rate at which such transactions would be charged remains to be finalised but it was proposed in the draft Directive that transactions in shares would be subject to a charge of 0.1%, which is lower than that which currently applies in Ireland.
Assurances were given at ECOFIN last week that all Member States will be kept fully informed in the Council Working Party that is developing the proposals. I understand that the participating Member States hope to conclude discussions on the draft text of the proposal by the end of this year. However, the next meeting of the Council Working Party has yet to be scheduled.