Séamus Kirk (Louth, Fianna Fail)
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Question 9: To ask the Minister for Finance his views on the proposed European financial transaction tax; and if he will make a statement on the matter. [27634/11]

Michael Noonan (Limerick City, Fine Gael)
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The European Commission last week published its proposal for a financial transactions tax, or FTT. It also published its impact analysis to accompany this.

We will analyse the detailed proposals in the draft directive. The draft directive will now be subject to detailed discussions at EU level and, as always, we will participate constructively in those discussions. There is no consensus as yet among European member states on this issue, either about whether a financial transaction tax should be introduced or what precise form it should take.

It is important that any proposal does not have the effect of encouraging relocation of activity or damaging the EU's competitiveness in financial services. It is for this reason that there is an emerging view that the EU and other international groupings, such as the IMF and G20, should move in tandem in a global manner to avoid the danger of financial sector business gravitating to jurisdictions where taxes are not levied on financial transactions. The Commission has indicted that it sees its proposal as part of a wider development in this area.

Any tax would be best applied on a wide international basis to include the major financial centres. I also think it important that the proposed directive would apply on an EU wide basis to prevent any distortion of activity within the European Union.

The Commission is proposing that the FTT should be an "own resource" tax imposed centrally to fund the EU and will develop proposals in the context of the future of the EU budget. However, we will need to assess the impact of this on our contribution vis-À-vis any system based on gross national income, as is the current system.

Michael McGrath (Cork South Central, Fianna Fail)
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I thank the Minister. He has touched on the key point in his response, that is, that any such tax would have to apply on a global basis otherwise it will only serve to disadvantage the countries in the eurozone or, if it is applied across the 27 member states, the European Union.

There was an excellent presentation this morning by Financial Services Ireland about its plans for the future. It raised concerns about the Commission's proposal for this financial transactions tax. Given the importance of financial services in Ireland, with 33,000 employed, more than 7% of GDP and the ambitious plans for the future with a target of an additional net 10,000 jobs in the sector in the next five years, we need to tread carefully. Particularly in the context of the resolution fund which is being set up under the Central Bank and Credit Institutions (Resolution) (No. 2) Bill 2011 that we discussed last week, is it better that we would deal with the issue of having an appropriate fund domestically rather than having a tax across the European Union which will only serve to disadvantage us and the other members?

Michael Noonan (Limerick City, Fine Gael)
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It is, I suppose, the beginning of a debate. The Commission is charged, as part of its legal responsibility, to bring forward policy proposals for the Europe Union and it does this from time to time. Sometimes the proposals get legs under them and they are discussed quickly at political level. Other times they merely lie there and they are not activated.

This seems to have a push behind it from certain European countries but it is equally strongly opposed by others. For example, the UK has come out against it already. That seems to make it difficult for Ireland because if there is a financial transaction tax down town here which does not apply in London, there is a big risk of displacement. By the nature of that business, even if it applied euro wide, there would be a displacement effect into places such as New York, Singapore, Hong Kong and Malaysia, which is increasingly becoming the Asiatic centre for Islamic money and where Kuala Lumpur is the centre for its management.

There are many issues to be looked at. We must protect our interests.