Vol. 541 No. 2
376 Proinsias De Rossa asked the Minister for Finance if, in view of the growing disquiet on the impact of free movement of capital on developing countries, he will state his stance on a currency transaction tax; the position he is taking towards the Belgian Presidency proposal to examine, at European level, the feasibility of a Tobin type tax; and if he will make a statement on the matter. [21455/01]
I stated my stance on the Tobin tax in reply to a parliamentary question from Deputy Sargent on 3 April of this year, Parliamentary Question No. 70. Advocates of this tax would seek to impose a world wide tax on all foreign exchange transactions to reduce exchange rate volatility and to raise revenue to support international development. However, there are many difficulties identified by commentators in relation to the tax. Most recently, the Zedillo report, that was commissioned by the UN Secretary General to look at the issue of development finance concluded, inter alia, that “the merits of a currency transaction tax remain highly controversial.” The authors of the report added that “further rigorous study is needed before any definitive conclusion is reached on the feasibility and convenience of a Tobin tax.” An earlier report from the Finnish Ministry of Finance, in November 2000 also pointed to the many problems associated with the Tobin tax proposal.
As is known, the matter was discussed at the recent informal ECOFIN meeting in Liege on 22 September. With regards to the Belgian Presidency proposal to examine the feasibility of a Tobin type tax, the Presidency wishes to pursue the matter in the context of a general study to be carried out by the Commission on the issue of globalisation. However, it would be fair to say that most Finance Ministers, myself included, continue to have reservations about the Tobin tax proposal and it is not clear that a further examination of the issue by the Commission will ensure that satisfactory answers are given to the many real questions concerning the tax including: the difficulties relating to its practical implementation; its doubtful effect on short-term speculative capital movements; its conflict with the basic tenet of free capital movement in the EU; its disproportionate effect on small business and consumers; the probability that the tax would simply drive participants into other non-taxable alternatives; and the negative impact on liquidity in the foreign exchange market.
