Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

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 2015 was €424.13 million and I understand receipts to the end of August 2016 were more than €260 million.

The financial institutions levy I announced as part of budget 2014 is a revenue raising measure which provides for a contribution from the banking sector to Ireland's economic recovery. The levy is in place for the years 2014 to 2016, inclusive, with an anticipated annual yield of €150 million. As the levy is a percentage of an institution's DIRT liability in 2011, liability to the levy relates to the size of an institution's Irish operation.

The entire banking system has been underpinned by the strong Government support provided both here and abroad. It is appropriate, therefore, that the banking sector should make a contribution to the State's economic recovery. Accordingly, I announced in my budget 2016 statement that I propose to extend the levy out to 2021, subject to a review taking place of the methodology used to calculate the levy. This will bring in an additional €750 million over the period, which is a significant additional contribution to the Exchequer.

With regard to the discussions at European Union level, the Government's position is that a financial transactions tax would be best applied on a wide international basis to include the major financial centres to prevent the danger of activities gravitating to jurisdictions where taxes are not levied on financial transactions. Notwithstanding this, the Government is not prepared to stand in the way of EU member states which wish 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.

Additional information not given on the floor of the House

The proposal for a directive from the European Commission in the area of a financial transactions tax was published in February 2013. Ireland had many concerns about the proposal as drafted, not least of which were the potential impacts on, and the trading of, Irish sovereign debt in the secondary market and in total, the potential negative impact on the liquidity of the financial sector as a whole. Members of the Economic and Financial Sub-Committee on EU Sovereign Debt Markets have stated that the introduction of a financial transactions tax would have a significantly negative effect on sovereign debt markets and may impair the good functioning of secondary markets for sovereign debt resulting in reduced liquidity, reduced investor demand and, therefore, higher financing costs for states.

Our concerns are widely shared among member states, including some of the participating countries. These concerns have led to the issuing of a communiqué by the participating member states announcing that they have agreed to implement a financial transaction tax in a progressive manner, with the first step being a charge on shares and some derivatives.

On 17 June 2016, the ECOFIN Council discussed the current state of play with regard to the proposal of a number of member states to introduce a financial transaction tax. In the context of this discussion, ten of the original 11 member states - Estonia has indicated it no longer supports the proposal - issued a statement setting out their agreement on the core design principles of a financial transactions tax. The statement indicates that further reassurances were needed on two issues in particular, for which two task forces will be immediately set up. First, taxation of derivatives should not have a negative impact on public borrowing costs. Second, tax collection should be cost effective. The outcome of these two task forces was to be discussed in September. We understand the task forces have had some discussions but that significant differences of opinion remain.

Much uncertainty remains, therefore, as to the form the financial transactions tax might take and more detail would be needed on the final shape of the tax before a definitive conclusion could be reached about its impact on Irish taxation revenue.

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