This week's decision at EU level to initiate formal steps towards the introduction of a financial transactions tax (FTT) is a long overdue and welcome step. While it is only 11 of the 27 member states who have signed up, the tax will now evolve under the enhanced co-operation mechanism. It is unfortunate that Ireland, alone among the countries hardest hit by the financial crisis, has decided not to adopt the tax - Spain, Italy, Portugal and Greece have all signed up. This is all the more ironic given the explicit banking link to Ireland's crisis.
Some months ago, TASC published a document, in association with Christian Aid Ireland, entitled 'Tax Injustice: Following the Tax Trail'. The publication covered issues such as tax breaks (a topic close to my own research interests), the functioning of the Irish tax system and how it facilitates transfer pricing, profit manipulation and tax minimisation, and the relevance of all of this to the developing world and Ireland's commitments to policy coherence and Overseas Aid.
Within the section of the book looking at 'what should be done', I contributed a brief input on the concept of a Tobin Tax. In it I outlined the long-overdue need for a very small tax on financial transactions and highlight the benefits of such a tax given the context of the recent financial crash. At the very least, such a tax would offer a sustainable way of monitoring on an on-going basis the flows of financial liabilities which are implicitly underwritten by taxpayers who generally act as the rescuer if financial institutions (be they banks, pension funds etc) fail. However, a bi-product of such a tax would be a large revenue stream for use by governments and international agencies (European Commission etc). In all likelihood, the scale of the revenue raised by a FTT will be sufficient to provide funds for domestic, international and development needs. However, given the history of the FTT concept, it would seem timely that the development community re-asserted the case for funding development from an FTT. As we formally move to see an FTT in place, many of these issues are becoming highly relevant.
More on the concept and case for an FTT is available in the TASC publication entitled 'Tax Injustice: Following the Tax Trail' is available here