Pearse Doherty (Donegal South West, Sinn Fein)
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To ask the Minister for Finance if he will estimate the annual revenue that would be generated if a 0.1% financial transaction tax were to be imposed in this jurisdiction on the trading of bonds, derivatives and shares. [43264/12]

Michael Noonan (Limerick City, Fine Gael)
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At my request, the Economic and Social Research Institute (ESRI) and the Central Bank prepared an assessment of the Financial Transactions Tax (FTT) as proposed by the Commission. This report was circulated to Oireachtas Members and published by me in July. Given the wide variation in the estimated revenue yield from an FTT when different factors are taken into account and the uncertainty as to the form the tax would take, the report states that more detail would be needed on the final shape and scope of the tax before a definitive conclusion could be reached about its impact on the Irish financial system and taxation revenue. The report indicates that the “net revenue gain for Ireland from the introduction of an FTT … is likely to be modest”. Based on assumptions used by the Commission, including their proposed rates (the proposed rate on the exchanges of shares and bonds was 0.1% and the proposed rate of derivative contracts was 0.01%), the report estimates the potential yield from the FTT to be between €490m and €730m. Under the Commission’s proposal, 2/3rd of this yield would have gone directly to the EU to fund its Budget. Based on the report’s estimate, the net yield to Ireland from an FTT where we retained only 1/3 of the total collected here would be in the region of €163m to €243m – not dissimilar to the current yield from Stamp Duty on share transfers (€195m in 2011) which would have been abolished had we accepted the Commission proposal.

The Commission’s rates, on which the ESRI/Central Bank report’s estimate is based, vary from the rates suggested in the Deputy’s question.

The report identified the following downsides and potential downsides to the introduction of an FTT: Financial sector impact : An FTT could displace financial sector activity, especially when alternative locations are readily available – in this case the UK. This would pose a real risk to Ireland given the financial services sector accounts for 10% of GDP; Macro-economic impact: An FTT would likely lead to a lower level of economic activity in the financial sector, which might also result in lower receipts from income tax and corporation tax; Exchequer impact: A 1% stamp duty applies on transfers of shares in Irish companies. As indicated above, the Commission’s proposal would involve the abolition of this tax and the loss of existing Stamp Duty revenue, c. €180 m in 2010 and €195m in 2011.

I have stated from the outset of discussions on the FTT that any such tax would have to apply on a wide international basis and at a minimum on an EU-wide basis to avoid distortionary and behavioural impacts. Such impacts should be taken into account in considering any estimates of the potential yield from such a tax.