Michael D'Arcy (Wexford, Fine Gael) | Oireachtas source

In respect of carrying out a study of introducing a financial transactions tax, I refer to the joint Central Bank of Ireland-Economic and Social Research Institute, ESRI, report published in April 2012 which considered the possible economic impact of the application of such a tax.

That report analyses the potential economic impact on the financial industry at that stage based on the Commission's 2011 FTT proposal. I appreciate the study may be somewhat dated at this point but the report's conclusions are a useful indicator of the possible impact of introducing a financial transaction tax, FTT, in Ireland. Given that it is Government policy not to introduce an FTT, I do not consider it prudent to allocate resources to further studies or exercises in this regard at this time.

The joint Central Bank and Economic and Social Research Institute, ESRI, report recognises that assessing the likely impact on employment and tax yields due to migration of activity is difficult. This continues to be the case as it is difficult to assess behaviour arising from the introduction of such a tax and second round impacts on investment and employment. In 2012, the financial sector's share of overall economic output in Ireland was around twice as large as that of many other European countries and in 2016 it remained a significant element within the economy in terms of employment and gross value added. There is significant employment in the sector with around 40,000 individuals employed in international financial services and 90,000 employed in general financial services. The Central Bank and ESRI report sought to identify financial services sectors that could be impacted by an FTT. It suggested that insurance, banking and financial intermediation, and fund management and security brokering were potentially vulnerable to an FTT. Fund management in particular has been one of the growth areas of the financial services sector in Ireland, with some large employers and with a total estimated 14,500 employed in the sector.

The UK intention to commence the process of leaving the European Union increases the difficulties of introducing such a tax given the potential for the UK to compete more strongly using different domestic measures for such financial services activities outside the EU. The international financial services sector in Ireland is now a truly national industry, extending far-beyond the original Irish Financial Services Centre in Dublin’s docklands. The sector generates direct employment for approximately 40,000 people across over 400 companies, with an estimated one third of those jobs located outside the greater Dublin area. It is a thriving and vibrant sector, which makes an important economic contribution to this country. Indeed, the Government’s 2015 strategy for the international financial services sector, IFS 2020, is to grow jobs to 45,000 by 2020.

The firms with the highest propensity to migrate following the introduction of an FTT are likely to be in the non-banking sectors, which account for the smallest share of gross value added. Nevertheless, it indicates that the relocation of even a small number of large international banks or fund administration firms would result in a loss of income tax revenue, corporation tax revenue and an increase in unemployment. This would likely still be the impact now of introducing an FTT. Ireland already has a tax on financial transactions, a stamp duty on transfers of shares in Irish incorporated companies, which currently stands at 1%. The yield from this charge in 2016 was €391.94 million and I understand receipts to the end of October 2017 were over €361.41 million. If Ireland was to participate in the FTT it would require us to abolish this stamp duty.

With regard to discussions at EU level, the position taken by this Government and the previous Government’s consistent position is that a financial transactions tax would be best applied on a wide international basis to include the major financial centres. This would prevent the danger of activities gravitating to jurisdictions where taxes are not levied on financial transactions with a likely loss of employment and tax revenue. Notwithstanding this, the previous Government was not prepared to stand in the way of EU member states that wished to work together to implement a financial transactions tax; in this regard, adoption of a decision formally authorising enhanced co-operation took place during the Irish Presidency of the European Union in January 2013.

In any event, despite significant engagement by the relevant Member States there has been no agreement on the introduction of an FTT and it is not clear whether agreement will be achieved in the near future. I am of the view there are potentially significant negative employment, economic, and tax yield impacts from introducing an FTT in Ireland and I have no plans to introduce such a tax. Consequently, I oppose the Deputies' amendment.