Eoghan Murphy (Dublin Bay South, Fine Gael) | Oireachtas source

On carrying out a study on introducing a financial transactions tax, FTT, I would refer to the joint Central Bank of Ireland-ESRI report published in April 2012 which considered the possible economic impact of the application of an FTT. The report analyses the potential economic impact on the financial industry at that stage based on the Commission’s 2011 FTT proposal.

While I appreciate that the study may be somewhat dated at this point, the report’s conclusions are a useful indicator of the possible impact of introducing an 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-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 remains a significant element within the economy in terms of employment and gross value added. There is significant employment in the sector, with around 38,000 individuals employed in international financial services, almost one third of whom are employed outside of Dublin.

The Central Bank-ESRI report sought to identify financial services sectors which could be impacted by an FTT. It suggested that insurance, banking and financial intermediation, and fund management and security broking 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 a total estimated 13,000 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 of the European Union.

The international financial services sector in Ireland is now a truly national industry, extending far-beyond the original IFSC in Dublin’s docklands. The sector generates direct employment for approximately 38,000 people across more than 400 companies, with an estimated one third of these jobs located outside of Dublin. An estimated 200 of these companies are indigenous companies.

The report concludes that 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 IFSC banks or fund administration firms would result in a loss of income tax revenue and corporation tax revenue as well as an increase in unemployment. This would likely still be the impact now of introducing an FTT.

As I have stated on many occasions, Ireland already has a tax on financial transactions in the form of 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 million and I understand receipts to the end of October 2016 were more than €316 million. If Ireland were to participate in an FTT, it would require us to abolish this stamp duty.

On Deputy Burton's point on discussions at EU level, the position taken by this Government and consistently by the previous Government 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 and, 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.

See this speech in context