Ireland: Noonan warned about dangers of transaction tax
03 May 2013
Posted by: Author: John Mulligan
Source: John Mulligan (Irish independent)
The ultimate cost of the European Union's planned €35bn financial transaction tax will be borne by ordinary citizens and taxpayers and its effects will harm small and medium-sized businesses, the International Banking Federation (IBFed) has warned Finance Minister Michael Noonan.
The IBFed has written to Mr Noonan in his capacity as president of the EU's Ecofin council, spelling out what it believes are the dangers of the controversial financial transactions tax (FTT) that is due to come into force next year.
Although Ireland is not one of the 11 EU member states that is introducing the divisive FTT, it is responsible, as the holder of the EU presidency, for its implementation.
Plans for an EU-wide FTT were ditched last year when it became clear that some countries had deep reservations about the proposals. There were concerns that the tax could result in financial firms leaving the International Financial Services Centre in Dublin or reducing their activities there.
But the EU is enabling member states that do want to introduce the tax to do so under the so-called "enhanced co-operation" procedure.
That allows a proposal to be adopted by a minimum of nine member states, even if other members don't plan to do so. The countries that have signed up to the FTT plan are Germany, France, Italy, Spain, Portugal, Slovenia, Estonia, Belgium, Greece, Austria and Slovakia.
The European Commission reckons that the tax will raise between €30bn and €35bn a year from the 11 countries that do plan to implement it from next February. Eligible financial transactions – such as the purchase of sale of assets including shares, securities, bonds and derivatives – will be subject to the tax where at least one party in the transaction is based in a member state that's participating in the FTT. Research
"Numerous governments, independent research studies, financial market experts, tax experts, and prominent market commentators have all expressed their concerns over an FTT and identified its many shortcomings," the head of the IBFed, Sally Scutt, has told Mr Noonan.
"The IBFed is worried that the EC and some EU member states fail to understand that the reluctance of a majority of EU member states to participate in the FTT proposal is due to their negative assessment of its merits," she added.
The IBFed said that continuing to pursue the FTT in such circumstances has resulted in a design that "makes a bad tax even worse".
Last week, the UK government launched a legal challenge to the FTT.