Written answers

Friday, 16 September 2016

Photo of Ruth CoppingerRuth Coppinger (Dublin West, Anti-Austerity Alliance)
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262. To ask the Minister for Finance the amount that could be raised by applying a financial Activities Tax as proposed by the IMF. [25341/16]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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I take it the Deputy is referring to proposals made by the IMF in 2010.

In 2009 G20 Leaders requested the IMF to prepare a report on how the financial sector might contribute to meeting the costs associated with government interventions to repair the sector.  The IMF's subsequent report proposed two forms of contribution from the financial sector, serving distinct purposes. The first of these was a "Financial Stability Contribution" (FSC) linked to a credible and effective resolution mechanism. The main component of the FSC would be a levy to pay for the fiscal cost of any future government support to the sector. In relation to any further desired contribution from the financial sector the IMF said it should be raised by a "Financial Activities Tax" (FAT) levied on the sum of the profits and remuneration of financial institutions, and paid to general revenue.

In its 2010 report to the G-20 the IMF suggested three forms of FAT. The IMF considered that the revenue potential of the various forms of FAT would differ across countries, depending on the relative size, profitability and wage structures of their financial sectors, and would be constrained by the need to apply low rates where the impact on competitiveness or the risk of avoidance were of concern. The IMF report indicated very broad orders of magnitude for the potential tax base of the suggested forms of FAT for the pre-crisis year 2006. In respect of Ireland, the broad orders of magnitude estimated for the base were 8.4% of GDP, 5.7% of GDP and 1.8% of GDP respectively for the three different forms of FAT in 2010 but the base is likely to be different  now. The potential yield would of course depend on the tax rate applied. In the absence of further detailed work it would not be possible to estimate the amount to be raised by a FAT. There is no evidence that any state has adopted the FAT proposed by the IMF.

In Ireland we have a tax on financial transactions in the form of a Stamp Duty on transfers of shares in Irish incorporated companies. This currently stands at 1%. The yield from this charge in 2015 was €424.13 million and is estimated to yield €498 million in 2016.

The Financial Institutions Levy I announced as part of Budget 2014 is a revenue raising measure which provides for a contribution from the banking sector to Ireland's economic recovery. The levy is in place for the years 2014 to 2016 inclusive with an anticipated annual yield of €150 million. As the levy is a percentage of an institution's DIRT liability in 2011, liability to the levy relates to the size of an institution's Irish operation. The entire banking system has been underpinned by the strong Government support provided both here and abroad and I believe it is appropriate therefore that the banking sector should make a contribution to the State's economic recovery. Accordingly, I announced in my Budget 2016 statement that I propose to extend the levy out to 2021. This will bring in an additional €750 million over the period, which is a very significant additional contribution to the Exchequer.

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