Ireland will not challenge proposed new tax plans

Tuesday 06 May 2014 22.21
Only 11 EU member states want the FTT
Only 11 EU member states want the FTT

Minister for Finance Michael Noonan has said Ireland will not join Britain and Sweden in mounting a legal challenge to the proposed new financial transactions tax (FTT) agreed by an inner core of EU member states today.

He was speaking after 28 EU finance ministers received a submission on the new tax by ten member states.

Mr Noonan described the FTT as a "medium-term" project that would not impact negatively on Ireland's financial services sector.

The ten member states, led by France and Germany, issued a statement at today's ECOFIN meeting, saying that the new tax on financial market transactions would come into effect on 1 January 2016.

Originally, 11 member states were part of the group of countries who were pushing for the FTT under the enhanced co-operation rules introduced in the Nice Treaty.

However, it is understood that Slovenia did not sign the communiqué since its government collapsed over the weekend.

Britain has said it will challenge the FTT in the European Court of Justice (ECJ) if it negatively impacts on the City of London, while Sweden has promised to join Britain in any legal action.

The FTT is aimed at raising funds for social or public projects, such as combating poverty and the effects of climate change, via a levy on financial transactions.

Supporters said it will deter the kind of speculation that many blame for the banking and financial crises that began with the collapse of Lehman Brothers in 2008.

However, getting agreement among the 11 countries, which initially pushed for the tax, has not been easy.

Non-participating EU member states have complained that there was too much secrecy among the inner core about how the tax would work.

However, Mr Noonan said those concerns had been addressed.

Speaking to reporters after the meeting in Brussels, he said: "There were issues raised about ensuring that the countries that were not participating were fully informed about any unintended consequences there might be about the impact of a tax crossing state boundaries from the countries that were implementing it, so there were absolute commitments that everybody would be fully informed."

The communiqué issued by the ten countries acknowledged the complexities surrounding the issues, as well as the divisions even between the ten.

They said that technical work would continue, with shares and "some derivatives" being the first target of the tax when it comes into effect in 2016.

Mr Noonan said that what the ten countries had adopted was, in the end, similar to what the Irish and UK governments operate, which is stamp duty on share transactions.

He said that Ireland would not support any legal action against the FTT since it did not appear that it would jeopardise Ireland's financial services sector.

The apparent lack of ambition for the new tax has been criticised by anti-poverty campaigners.

Charity group Oxfam described the statement as "window dressing for voters" ahead of the European Elections. 

"Their current compromise does not yet amount to the ambitious FTT needed to ensure that the financial sector is finally made to pay its fair share of tax," said Natalia Alonso, the head of Oxfam's EU office.

"Not only have they delayed putting the tax in place until 2016, but they remain worryingly vague on the taxation of derivatives; a key cause of the financial crisis which represent at least two-thirds of the potential revenue.

"By failing to spell out how the money will be used, governments are sending a worrying signal to the poorest people in Europe and beyond.

"The FTT has always been associated with helping those hit hardest by the economic crisis and climate change, and leaders cannot back away from this now."

Countries operating the new tax will include France, Germany, Italy, Belgium, Spain, Slovakia, Estonia, Austria, Portugal and Greece.