Mick Wallace (Wexford, Independent) | Oireachtas source

Yes.

Today in Brussels Finance Ministers are discussing the financial transaction tax. Eleven EU countries seem intent on signing up to it, including two of the biggest member states, France and Germany, as well as two of the bailout programme countries, Portugal and Greece. I am disappointed that Ireland is not doing the same. The Minister for Finance, Deputy Michael Noonan, has argued on several occasions that the introduction of a financial transaction tax could displace financial sector activity. However, little concrete evidence has been brought forward to support this assertion. As UK researchers have highlighted, financial companies still enjoy considerable tax advantages in Ireland. The financial transaction tax would only be levied on a part of their activities. When it is considered that the tax on 1 million derivative trades would come to only €100, it is hard to see how this would undermine an entire sector.

Given that the financial sector played a major role in creating the economic crisis and the massive socialisation of private debt that has taken place in recent years, there is strong support across Europe and elsewhere internationally for moves that would force the financial sector to make a fair contribution to economic recovery. In addition, as the European Commission has pointed out, the sector is under-taxed in comparison to other sectors. The many benefits of a financial transaction tax include the fact that it would reduce the volume of high risk financial transactions and, therefore, help to prevent future crises. It would also help countries to monitor their financial sectors in a better fashion. As we, unfortunately, know, governments and state agencies had little insight into the scale and nature of financial transactions as the 2008 financial crisis unfolded. This lack of information inhibited a comprehensive response to the crisis.

A financial transaction tax would also level the playing field for JobBridge SMEs which are not exempt from VAT. This exemption means that the financial sector enjoys preferential treatment over other sectors of the economy. This is a questionable policy decision, given how important the SME sector is in terms of employment. Over three quarters of the population are still involved in the SME sector, despite the difficulties it is going through.

An interesting article by Mr. Chris Huhne was published in The Guardianlast week. Mr. Huhne is a former Liberal Democrat Cabinet Minister in the United KIngdom who had to resign because he had passed on a couple of penalty points to his wife. For some strange reason, the English do accountability. It has been proved today that the Minister for Justice and Equality broke the law, but everyone seems to be okay with it. Seemingly, we do not have a problem with it here. Mr. Huhne's article focuses on the French author Thomas Piketty's book Capital in the Twenty-First Century. I have only read an analysis of the book to date, but it is very interesting. In the book Mr. Piketty challenges the conventional post-war view that capitalism was developing in a balanced way such that growth would float all boats. This complacent assumption was true in the post-war reconstruction period but only as a consequence of war and policies adopted to cope with the shocks of war. The physical destruction of wealth by war was followed by a further destruction of private wealth, as governments reduced their own war debts through inflation. Mr. Piketty has revived Marx's belief that capital would accumulate and become concentrated in ever fewer hands. Mr. Piketty, arguably one of the world's leading experts on tax and wealth, bases his argument on an analysis of wealth dating back two centuries and tax statistics in many countries dating back to the first progressive income tax under a Liberal Government in Britain in 1909. He says, "There is no natural spontaneous process to prevent destabilising, inegalitarian forces from prevailing permanently." He shows that in rich countries, at the frontier of technology and skills, the growth of incomes has been between 1% and 2% a year. Meanwhile, the rate of return on capital averages at about 4% to 5% a year. Therefore, those who draw their income from capital returns will outstrip wage earners and inherited wealth grows faster than output and income. That same philosophy is something about which the Government should think. Part of the housing crisis is related to the fact that people were allowed to accumulate incredible profits on the sale of land. Only a handful of people controlled most of the development in Dublin city, which, sadly, is still true today. In 1974 the Kenny report recommended that the price of development land only be allowed to rise a certain percentage above the price of agricultural land. It would make a lot of sense for the Government to bring forward such a measure.

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