Dan Boyle (Cork South Central, Green Party)
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Question 306: To ask the Minister for Finance his views on Austrian Chancellor Wolfgang Schuessel's suggestion that the EU could part-fund its budget with a levy on international financial transactions; and if he will make a statement on the matter. [26618/05]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The Austrian Chancellor recently stated there should be an automatic financing mechanism for part of the EU budget, for example, through taxation of international financial transactions. The issue of a currency transactions tax, Tobin tax, has been considered in several fora, including the informal ECOFIN meeting at Liege on 22 September 2001. The Belgian Presidency indicated it wished to pursue the matter in the context of a general study to be carried out by the Commission on the issue of globalisation. However, most EU Finance Ministers at that time had reservations about the Tobin tax proposal. Many believed it was not clear that a further examination of the issue by the Commission would ensure that satisfactory answers would be given to the many real questions concerning the tax, including the difficulties relating to practical implementation of the tax; its doubtful effect on short-term speculative capital movements; its conflict with the basic tenet of free capital movement in the EU; its disproportionate effect on small business and consumers; the probability that the tax would simply drive participants into other, non-taxable, alternatives; and the negative impact on liquidity in the foreign exchange market. I am of the same view.

Nevertheless, at a formal ECOFIN meeting on 16 October 2001, it was agreed the Commission would carry out a study on globalisation and that this study would examine the arguments for and against a Tobin tax. The study, Responses to the Challenges of Globalisation, was published on 14 February 2002. On the matter of the Tobin tax, the study concluded that "while as a source of additional revenue a currency transaction tax may look appealing, its feasibility is, however, not demonstrated". This issue has also been raised at EU level in 2005 in the context of the financing of development aid but was dismissed by the EU Commission for reasons such as those already outlined. As indicated in replies to previous parliamentary questions on this matter, I do not propose to introduce such a tax as I remain unconvinced of its feasibility.