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Written Answers. - Currency Transaction Tax.

Wednesday, 27 March 2002

Dáil Éireann Debate
Vol. 551 No. 3

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 141. Mr. M. Higgins Information on Michael D. Higgins Zoom on Michael D. Higgins  asked the Minister for Finance Information on Charlie McCreevy Zoom on Charlie McCreevy  the Government's views on the issue of the Tobin tax; and if he will make a statement on the matter. [10461/02]

Minister for Finance (Mr. McCreevy): Information on Charlie McCreevy Zoom on Charlie McCreevy As the Deputy will be aware, I have given my views on the Tobin tax issue on several occasions, most recently in reply to Question No. 75 put down by himself on 24 October last.

The issue of the Tobin tax was discussed at the informal Ecofin meeting at Liege on the 22 September 2001. The Belgian Presidency indicated that it wished to pursue the matter in the context of a general study to be carried out by the Commission on the issue of globalisation. However it would be fair to say that most Finance Ministers, myself included, continue to have reservations about the Tobin tax proposal, and believe that it is not clear that a further examination of the issue by the Commission would ensure that satisfactory answers would be given to the many real questions concerning the tax including: the difficulties relating to practical implementation of the tax; its doubtful effect on short-term speculative capital movements; its conflict with the basic tenet of free capital movement in the EU; its disproportionate effect on small business and consumers; the probability that the tax would simply drive participants into other, non-taxable, alternatives; and the negative impact on liquidity in the foreign exchange market.

Nevertheless, at a formal Ecofin meeting on 16 October 2001, it was agreed the Commission would carry out a study on globalisation and that [842] this study would examine the arguments for and against a Tobin tax. This study, Responses to the Challenges of Globalisation, was published on 14 February. On the matter of the Tobin tax, the study concluded that “while as a source of additional revenue a currency transaction tax may look appealing, its feasibility is, however, not demonstrated”. On the general point of international taxes, such as the Tobin tax, to fund international development, the study concluded, “it seems that meeting needs for enhanced financing of development and for the provision of global public goods in the short to medium term will require more substantial contributions from national budgets and a further increase in the efficiency of resource use than is presently the case”.

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