By Rachel Mullen.
The 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 concerning 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 failing 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 consequent 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, produced 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 queried 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 officials from the Department of Finance and representatives from the finance industry (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 distribution of this questionnaire on the FTT to the financial sector by her own division, 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 questionnaire 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 benefit of the FTT to the economy.
One key pillar of Government opposition to the FTT is that the revenue raised would be negligible. This assertion 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 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 introduced 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 contribution 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 meeting 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 recouping 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 subsequent 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 circulation. 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 development 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 subtracted 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 revenue 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”. •
