Objections to EU transaction tax

Ireland was among a number of countries blocking an EU-wide financial transaction tax worth an estimated €57bn a year, but said it would not stand in the way of a countries going ahead with it.

Finance Minister Michael Noonan said that they could object to this option also if they felt it would adversely the single market, and he warned that it could create a dangerous precedent allowing the EU to interfere with a country’s control over its taxation.

Germany has said it will go ahead with plans for the tax and believed it had at least nine countries, the number required, to go ahead using enhanced co-operation procedures to draw up a common scheme to tax financial transactions, mainly the sale of shares and derivatives.

They are expected to ask the European Commission to prepare a scheme in the next few days. This will need the support of the European Parliament and of two thirds of the 27 member countries.

It was not clear what scheme the nine will request — whether it will be a full financial transaction tax or, as the German finance minister Wolfgang Schaeuble suggested in the past, introduced in two stages with a stamp duty first on shares and bonds, later extended to cover derivatives.

Ireland’s objections appeared to be the strongest of all EU states with Mr Noonan saying Ireland had a 1% stamp duty on transactions and he feared that unless the transaction tax applied to all 27 countries it would lead to financial service businesses transferring elsewhere.

If countries decide to go down the enhanced co-operation route, they must abide by certain criteria including that it would not affect the single market or the status of non-participating member states.

While enhanced co-operation was only used twice before, this was the first time it would be used for a central economic issue. “We would be concerned about the process and the procedure carrying precedence when tax is discussed in the future,” said Mr Noonan.

He would examine the framework for the proposal but while Ireland would not participate, it would study the impact it might have on countries not included. Later, he said he could not figure out how it could have an adverse influence.