Michael D Higgins (Galway West, Labour)
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Question 73: To ask the Minister for Finance if, in view of recent financial developments, he is in favour of European and international support for the Tobin tax. [38396/08]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Deputy may be aware that the issue of a currency transactions tax (Tobin tax) has been considered in a number of fora, including the informal Ecofin meeting at Liège on 22 September 2001. At that stage, the Belgian Presidency indicated that 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, it would be fair to say that most EU Finance Ministers at that time had reservations about the Tobin tax proposal. In particular, it was believed that it was not clear whether a further examination of the issue by the Commission would ensure satisfactory answers to issues relating to the tax, including: 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.

Nevertheless, at a formal Ecofin meeting on 16 October 2001, it was agreed that the Commission would carry out a study on globalisation and that this study would examine the arguments for, and against, a Tobin tax. This 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 was also 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.

I do not propose to introduce such a tax as I am unconvinced of its feasibility given the many practical difficulties and potentially negative implications arising from its introduction.