Kevin Humphreys (Dublin South East, Labour)
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Question 97: To ask the Minister for Finance if he is concerned at the residence and issuance principles contained within the European Commission proposal for a Financial Transaction Tax which are not considered in the Central Bank-ESRI assessment; if it will affect financial transactions carried out in Ireland on securities that are issue in another EU country that decides to participate in an FTT through enhanced co-operation; and if he will make a statement on the matter. [36181/12]

Michael Noonan (Limerick City, Fine Gael)
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The EU Commission's proposed Financial Transactions Tax (FTT) is a residence based tax – that is, a transaction would be subject to the tax if one of the parties was a financial institution which is resident in one of the Member States. Sections 2 and 3 of the ESRI/Central Bank report discuss the residence basis of the tax. The Commission's proposal did not envisage that the FTT would be charged on an issuance basis – that is, by reference to whether the company whose shares were being transferred, or whose shares were subject to a derivative transaction, was resident or registered in an EU Member State. The European Parliament has proposed that the FTT should operate on both a residence basis and an issuance basis, so that a transaction would be liable to an FTT it was carried out by a financial institution in an EU Member State or if it involved a transfer of shares or a derivative transaction related to shares in a company registered in an EU Member State. While the Council (comprising representatives of the EU member state Governments) is obliged to consult with the European Parliament before adopting a final position on Commission proposals, the European Parliament specifically does not have co-legislator status for proposals in the taxation area, as it would for example with co-decision proposals in other areas. In other words, while the European Parliament must be consulted, they have no decision making powers on tax matters.

Although the Commission's proposed FTT would be on a residence basis, the new French FTT is charged on an issuance basis – it applies if the shares are issued in France, and the company has market capitalization in excess of €1 billion. Our Stamp Duty on share transactions is also charged on an issuance basis - it applies to instruments and deemed instruments which transfer shares in Irish incorporated companies – as is the UK Stamp Duty Reserve Tax.

It is not clear as yet what form the "enhanced co-operation" FTT will take but if it was introduced on a residence basis, it is possible that a transaction could be subject both to an FTT and Irish Stamp Duty – for example, a purchase of shares in an Irish registered company by a financial institution in one of the "enhanced co-operation" Member States. As I stated in reply to Parliamentary Question No. 31431/12 on 28 June 2012, we will continue to monitor discussions on the FTT to ensure the compatibility of any proposed measure with the internal market and with existing taxes on financial transactions, including our Stamp Duty.