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Ireland's political and cultural magazine
12 December-January 2014
T
HE Government is opposed to
the introduction of a Financial
Transactions Tax (FTT). There is,
however, a lack of transparency about
how the Department of Finance position
of opposition to the FTT was arrived
at. There is also a failure to update the
Oireachtas on recent developments con-
cerning the proposals for a FTT at EU
level that have the potential to make the
FTT a more favourable proposition for
Ireland.
In 2011 the European Commission put
forward proposals for the introduction of
an EU-wide Financial Transaction Tax.
However, with the member states fail-
ing to agree it, the proposal was shelved
in mid-2012. Under the new European
Enhanced Cooperation Procedure, eleven
member states (representing some 90%
of Eurozone GDP) agreed to proceed with
an FTT. Roll-out of an initial phase is now
scheduled for January 2016.
The Minister for Finance, Michael
Noonan, has stated that Ireland will not
be joining the eleven member states in
introducing an FTT. His first objection
is a concern that the introduction of an
FTT would result in the flight of financial
institutions from the IFSC to London or
other global financial centres with a con-
sequent loss of jobs. The second objection
is based on the estimated revenue from
an FTT, which, it is suggested, would be
negligible when a number of issues are
factored into the equation.
During a briefing to the Oireachtas
Joint Committee on Finance, Public
Expenditure and Reform, on November
8th 2012, the Minister for Finance was
asked how the Government arrived at its
position of opposing the FTT. Noonan
noted that a briefing document, pro-
duced for the Department by the ESRI
and the Central Bank in April 2012 (‘The
EU financial transactions tax proposal: a
preliminary evaluation’) formed the basis
of Government thinking. This was que-
ried during the debate by Labour Deputy
Kevin Humphreys, who asked Noonan
what role the IFSC Clearing House Group
played in influencing the development of
the Government’s position.
Concerns have been raised about the
influence afforded to this Clearing House
Group, whose members constitute Big
Finance. Their meetings are chaired
by the Department of the Taoiseach
and attended by representatives of
Government Departments.
In a subsequent Oireachtas briefing, on
October 2nd 2013, an official from the
Department of Finance, Brenda McVeigh,
was again asked, by Fianna Fáil deputy
Thomas Byrne, what, if any, briefings
the Department had taken on the FTT
from the IFSC Clearing House Group.
The official said that the Department of
Finance had not met with the Clearing
House Group regarding the FTT nor had
the Department “invited” any groups to
discuss the FTT.
This is patently not the case. The
minutes of ‘An FTT Roundtable’, held
in October 2011, with financial sector
bodies and Department officials were
obtained by Nessa Childers MEP under
Freedom of Information legislation. The
roundtable was attended by three offi-
cials from the Department of Finance and
representatives from the finance indus-
try (including key members of the IFSC
Clearing House Group – KPMG; PWC;
IFSC Funds; State Street; ISE and IBF). The
meeting note indicates the circulation
of a questionnaire from the Department
of Finance to “various financial service
organisations” inviting their views on the
FTT. This questionnaire was distributed
by the Tax Division of the Department
of Finance. This is the same division in
which the official briefing Byrne and the
Oireachtas Committee is based.
Was the official unaware of the distri-
bution of this questionnaire on the FTT
to the financial sector by her own divi-
sion, given that she appears to be a lead
on the FTT having been the official who
briefed the Oireachtas Committee in
2012 and again in 2013? The question-
naire has nine questions asking about
likely impact, cost and knock-on impact
of the FTT on the financial sector. There
is no question soliciting views on the ben-
efit of the FTT to the economy.
One key pillar of Government oppo-
sition to the FTT is that the revenue
raised would be negligible. This asser-
tion is based on a calculation in the ESRI/
Central Bank report. This estimated the
likely revenue to Ireland from an FTT
(based on the proposed level of the tax
in the original EU proposals) at between
€490m and €730m. At an Oireachtas
Finance Committee was misled about meetings
with Clearing House Group, set-off in Ireland’s
EU contribution and removal of two-thirds take
for EU. By Rachel Mullen
More bbing from
the Department
of Finance
NEWS FINANCIAL TRANSACTIONS TAX
There is a
notable lack of
full and frank
disclosure of
information
that does
not suit the
Department’s
narrative
“
December-January 2014 13
Committee briefing in November 2012,
the Department of Finance set out how
this gross figure would be reduced to a
negligible amount. The official explained
that under the EU Commission’s proposal,
two thirds of this yield would go directly
to the EU to fund its budget leaving a net
yield to Ireland in the region of €163m
to €243m. This yield, she explained, is
not dissimilar to the current yield from
Stamp Duty on share transfers, which
was €195m in 2011, and which Ireland
would have had to abolish if it intro-
duced an FTT. Deputy Kevin Humphreys
pointed out that the official had failed to
factor into her calculations the fact that
if the EU did recoup two thirds of the FTT
yield, this would be off-set by a reduction
in the member states’ annual contribu-
tion to the EU.
Even with this correction, the sums
did seem to be the knock-out blow to
any suggestions that an FTT might be a
means of raising much needed revenue
in Ireland. In addition, the idea of the
EU recouping two thirds of the yield to
fund its budget was unpalatable to some.
Sinn Féin Deputy Pearse Doherty voiced
concern that the EU Commission should
in no way be given the power to raise its
own revenue in this way. This issue was
also raised by Doherty in a recent meet-
ing on the FTT with Claiming our Future,
as a key factor in Sinn Féin’s opposition
to the FTT.
However, what the Department
of Finance neglected to point out
to Oireachtas members during the
November 8th 2012 briefing was that
once the proposal for an EU-wide FTT was
removed from the table (since mid-2012)
the idea of the EU Commission recoup-
ing two-thirds of the yield was also off
the table for any new FTT agreement
that might proceed under the Enhanced
Cooperation Procedure.
Perhaps, one could argue, the official
was unaware of this fact when briefing
the Oireachtas in November 2012. The
European Movement UK was already
writing in December 2012 that this
aspect of the FTT proposal was off the
table. If an NGO was aware of this fact,
surely officials from the Department of
Finance who regularly liaise with the
EU and who are leading the work on
this issue for Government would have
known? Maybe, being generous, they did
not know in November 2012, but what
is more difficult to explain is the failure
to mention this critical fact at a subse-
quent Oireachtas Committee briefing a
year later on October 2nd 2013.
By this time the detail of the FTT
proposal being pursued by the eleven
member states was eight months in circu-
lation. The proposal makes no mention of
the EU collecting two -thirds of the yield
apart from noting that the member states
might wish to consider whether some of
the revenue would be used as part of their
State’s contribution to the EU budget. Yet
it is clear from the October Oireachtas
debate that the Department of Finance
either are not aware of this new develop-
ment or have chosen not to include it in
their briefing to members.
Deputy Richard Boyd Barrett also
asked the official about the likely yield
from an FTT: “Is it not the case, however,
that the €300 million would be sub-
tracted from our total contributions to
the EU budget and there would, in effect,
be a net benefit to the State?”. The official
from the Department of Finance did not
disabuse Boyd-Barrett of the notion that
the revenue yield from the FTT would be
deflated by the EU recouping two-thirds.
Her response was to reiterate that the
FTT would not raise any additional rev-
enue for Ireland over and above what
current stamp duty raises.
This situation raises questions about
how the Irish position on the FTT was
informed. It raises issues about the
transparency of the information being
presented and the seeming lack of full
and frank disclosure of information that
does not suit the Department’s narrative.
Perhaps it is best summed up by Deputy
Kevin Humphreys who in the course of
the November 2012 briefing noted: “As
an elected parliamentarian I am keen to
get the information rather than a piece
of information that suits one particular
side of the argument”. •
the joint committee on nance,
public expenditure and reform
The idea
of the EU
Commission
recouping two-
thirds of the
yield was also
off the table
for any new
FTT agreement
that might
proceed under
the Enhanced
Cooperation
Procedure
“
