Dáil Éireann - Volume 562 - 25 February, 2003

Written Answers - Currency Speculation.

  157. Mr. Cuffe asked the Minister for Finance if he is considering legislation similar to that recently passed in Belgium and France, seeking to bring about an international tax on currency speculation; and if he will make a statement on the matter. [5394/03]

  Minister for Finance (Mr. McCreevy): The issue of the Tobin tax on currency speculation has been considered in a number of fora, including the informal ECOFIN meeting at Liege on 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 European 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 believed it was 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 that the Commission would carry out a study on globalisation and that this study would examine the arguments for and against a Tobin tax. This study, entitled Responses to the Challenges of Globalisation, was published on 14 February 2002. 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”. There have been no developments at EU level since in regard to the possible introduction of such a tax. I am informed that votes have been passed over the past two years in the French and Belgian Parliaments in support of the principle of a Tobin tax. However, neither country has implemented such a tax, nor appears likely to do so in the foreseeable future. I remain unconvinced of the feasibility of such a tax.

[151]   Question No. 158 answered with Question No. 155.