It has been a long and hard struggle for a Financial Transaction Tax in Europe. Now it looks like a breakthrough is possible. This has yet to make an impression on the Irish media and there has been no critique of the Irish Government’s refusal to participate.
The European Commission had proposed an EU-wide Financial Transactions Tax but failed to get the necessary unanimous support. Eleven Member States decided to proceed with introducing it through what is called the ‘enhanced co-operation’ procedure. These were Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia. It was given a green light in January 2013.
Even the International Monetary Fund has stated that the financial services sector is under-taxed
Britain took a case to the Europeaember States as to what they were actually going to do.
Now it’s down to the wire. The December 8th meeting of ECOFIN economics and finance ministers is widely seen as the make or break moment for the Financial Transactions Tax. The prospects are surprisingly good. France is pushing it, as it really needs new sources of finance if the COP 21 climate outcomes are to be ambitious and to be implemented. Germany remains determined but warns it must happen now or never. Angela Merkel has been clear all along “that financial markets have to contribute their share to the recovery of economies”.
The final proposal must be agreed unanimously by all participating countries. They are working towards the progressive implementation of a tax that would involve a harmonised minimum 0.1% tax rate for transactions in all types of financial instruments except derivatives (to which a 0.01% rate would apply). It is suggested that this would enable the financial sector to make a fair and substantial contribution to tax revenues and complement regulatory and supervisory measures by creating a disincentive to transactions that “do not enhance the efficiency of financial markets”.
There are blocks to be overcome. It seems that there is agreement to tax shares, corporate bonds and all derivatives with the exception of derivatives linked to sovereign bonds. This means particular issues for indebted nations are addressed. However, agreement has still not been reached on how the Financial Transactions Tax should be levied. Some Member States have also put forward specific proposals to meet their particular needs. If they do get agreement the Financial Transactions Tax would be levied from the second quarter in 2017.
This is a small tax but with the potential to raise significant revenue for hard-pressed national budgets. It is estimated that the tax will raise between 30 and 35 billion Euro for the eleven Member States involved. NERI, a thinktank, has estimated that the tax would increase exchequer revenue by €350 m per annum in Ireland. Who could say no to that?
At a time when tax revenue is needed to address alarming levels of poverty and homelessness and to restore damaged and diminished public services, why would an Irish Minister of Finance say no to an additional €350m? At a time when new revenue is needed to fund global development and the Sustainable Development Goals and measures to respond to climate change and the conclusions of COP 21 why would he say no?
It is ultimately a measure of the power of the financial services sector in Ireland and its ability to influence politics. Michael Noonan says there would be job losses and that financial services would desert us for London. This argument fails to reflect the low level of tax proposed and the very favourable conditions enjoyed by companies in the Irish Financial Services Centre. Those campaigning for the tax – in a campaign organised by Claiming Our Future, argue that it would actually increase jobs because of the additional public expenditure.
The Irish government put €64bn of public money into rescuing the banks. Some €42bn of this was borrowed. Over 20% of our public debt is now a result of the bank bailout. The Irish people are estimated to be paying €9,000 Euro each for the banking-crisis debt – the highest in the world. Across the rest of Europe, the average cost per person is just €192. Even the International Monetary Fund has stated that the financial services sector is under-taxed.
It is not too late. Member States can sign up to enhanced co-operation at any time. We need a Minister for Finance who will say yes to a tax that would yield much needed revenue, reduce financial speculation, and ensure the financial sector pays its way.