Vol. 554 No. 5
406 Mr. Crowe asked the Minister for Finance if he has considered supporting calls for the imposition of the Tobin tax on speculative transactions on the currency markets which even at the low rate of 0.1% could raise $100 billion every year to be used for the aid of the developing world in view of the decision of the Government to drastically cut the development aid budget. [15885/02]
The issue of the Tobin tax has been considered in a number of fora, including the informal Ecofin meeting at Liège on 22 September 2001. The Belgian Presidency indicated that it wished 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 believed that it was not clear that a further examination of the issue by the Commission would ensure that satisfactory answers would be given to the many real questions concerning the tax including: the difficulties relating to practical implementation of the tax; 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.
Nevertheless, at a formal Ecofin meeting on 16 October 2001, it was agreed that the Commission would carry out a study on globalisation and that this study would examine the arguments for and against a Tobin tax. This study, "Responses to the Challenges of Globalisation", was published on 14 February 2002. On the matter of the Tobin tax, the study concluded that "while as a source of additional revenue a currency transaction tax may look appealing, its feasibility is, however, not demonstrated".
I remain quite unconvinced of the feasibility of such a tax, given the problems associated with it as outlined above.
