This month’s NERI seminar featured a new research paper which examined the likely revenue yield for the Republic of Ireland from the implementation of a financial transactions tax (FTT).
In 2011 the European Commission outlined proposals for a Europe wide FTT. Since then the proposal has been pursued by ten countries under ‘enhanced cooperation’ procedures with plans evolving to introduce the tax during 2017/2018. To date Ireland has not signed up to adopting a FTT.
The European Commission proposal is for a tax of 0.1% (one-tenth of one per cent) on the trading of bonds and shares and 0.01% (one-hundredth of one per cent) on the value of derivative agreements.
The paper estimates the revenue that Ireland would collect from participating in the European FTT. It finds:
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Annually, the net yield from a FTT would amount to between €320m and €350m – the tax would by itself raise a higher amount (€630m-€660m) but its introduction requires the simultaneous removal of stamp duty on shares.
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In the Irish case, revenue from a FTT is heavily dependent on taxing transactions in equities and commercial bonds.
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It also notes that there are some implications which accompany the taxes implementation. Of these most are positive although the tax, like all taxes, does carry some distortionary effects. However, it is hard to argue that the benefits would be exceeded by the costs.
In the years to come Ireland will face a decision on its participation in a FTT. This paper is intended as a contribution towards the formation of that policy choice.
The new research paper is available here: Collins, M.L. (2016), ‘Estimating the Revenue Yield From a Financial Transactions Tax for the Republic of Ireland’ NERI Working Paper, 2016/ No. 34. Dublin, The Nevin Economic Research Institute.