Noonan rules out tax on financial transactions

MINISTER FOR Finance Michael Noonan said Ireland will not adopt a new European tax on financial transactions. Under Denmark’s presidency of the EU, talks were set in train to introduce such a tax in a limited number of countries.

Although the Minister left the door open to participate in a slimmed-down tax scheme, he made it clear to his EU counterparts that Ireland would not adopt a full-blown transaction tax along the lines proposed by the European Commission.

“The proposals being made are not acceptable to us, in particular if they are applied to fewer than 27 [/[member states],” Mr Noonan said in a public debate with other ministers in Luxembourg. “We would look in detail at any proposals that are developed but at the moment we wouldn’t participate.”

He noted Ireland already imposes stamp duty on share transactions and said the Government was not convinced of the case to go beyond that point. The commission’s proposal would impose a tax on a much wider variety of transactions, including trades in financial derivatives.

Dublin fears financial services business would transfer away from the State if Ireland introduced such a tax and countries such as Britain did not.

Germany is in the vanguard of countries seeking a pan-European transaction tax, arguing banks and other institutions should pay more tax at a time of extensive government for the sector in the wake of a financial crisis it largely caused.

However, resistance from Britain, Sweden and other member states led Denmark to conclude it will not be possible to achieve unanimous support for the commission’s plan.

Germany still has sufficient support to initiate an “enhanced co-operation” procedure in which a group of at least like-minded countries can adopt a common European plan which only they will implement.

“We should give it a try,” German minister Wolfgang Schäuble told the debate.

This enhanced co-operation procedure – established in the Lisbon Treaty and used only twice before – enables a coalition of willing member states to proceed together with a plan opposed by others.

“It’s not tomorrow then,” said Danish minister Margrethe Vestager after a legal expert set out the cumbersome measures required to advance such a proposal.

Although Mr Noonan said he recognised the right of a group of nine or more countries to go down this road, he said care should be taken to protect the rights of non-participants.

“Under the treaties, there are certain criteria set out and I believe these have to be met. They include having no impact on the single market or the status of non-participating member states. I believe these have to be applied rigorously if we’re going down the enhanced co-operation route,” the Minister said.

The only two occasions on which the enhanced co-operation procedure was previously deployed were in respect of divorce and patent law, he added.

“It has never been used as a device for a central economic issue and we’d be concerned about the process and procedures creating precedents which would carry weight when matters such as taxation are discussed in the future.”

Speaking as he left Luxembourg after two days of meetings with his counterparts, Mr Noonan said the latest EU-International Monetary Fund “troika” review of Ireland’s bailout was cleared by the ministers. “We were told to keep at it, drive on.”

EU leaders are preparing to give the European Investment Bank more lending firepower to boost lending into the “real economy”, but the Minister said Ireland faced a difficulty because the credit rating of the State and the banks did not meet the EIB’s lending criteria. “There was a general agreement that other ways would be found for collateralising the counterparties in Ireland,” Mr Noonan said.

EIB president Werner Hoyer will visit Dublin on July 5th for talks on this matter, he added.