COULD YOU HAVE imagined it? This is the kind of Europe we now have built for our children.
We have seen the grotesquely overgrown financial sector destroy our economy, caused millions of Europeans to lose their jobs, handed our children billions of euro in bad debts, and yet its leaders evade sanction and even walk away with multi-million euro bonuses.
When after much pressure from the European Parliament, the European Commission proposed a very modest tax on financial transactions on this very same financial sector – many member states refuse to support it.
The UK for example is deeply opposed to the Financial Transaction Tax, which is not surprising given that financial services in the City of London provide more than 50 per cent of the political donations for the ruling Conservative Party.
What is surprising to me is that my own Irish government, in which my own Labour Party is in coalition with the conservative Fine Gael party, is also opposed to the FTT.
Given Ireland’s recent nightmare experience with its financial sector, how could this Irish government take such a stance? The short answer is due to very sophisticated and extensive industry lobbying of government at the highest levels.
How exactly a 0.1 per cent tax on transactions of shares/bonds and 0.01 per cent for derivatives could possibly affect real investment decisions has never been made clear. So far though the lobbying has been very successful and with most of the media unable to process anything other than soundbites, there has been little public debate in Ireland on the FTT.
Have they read it?
Echoing other hesitant governments around Europe, the Irish government claims that the FTT would put Irish jobs in the sector at risk of relocation if the UK does not sign up.
Repetition of this simple but effective industry lobbying argument means the Irish government has not read – or does not wish to read correctly – the Commission proposal. The FTT is structured, most importantly via the “residence principle”, to remove the possibility of relocation and avoidance.
As long as a financial institution anywhere in the world intends to either undertake transactions in the FTT-zone or to serve a European client base it would be deemed to be established in the territory of the member state associated with the transaction (Article 3.1 of the proposal). Therefore a financial institution, even if in New York or Singapore, would have to abandon all its European clients if it wanted to avoid paying the tax. Given that the EU market is the largest in the world this is very unlikely, and as relocation makes no difference, it is also very unlikely.
In its report, the European Parliament added an “issuance principle”, whereby financial institutions located outside the EU would also be obliged to pay the FTT if they traded securities which were originally issued within the EU.
For example, if Siemens shares originally issued in Germany were traded between a Hong Kong firm and one in the US, both would have to pay the tax to the German tax authorities. Under the Commission’s proposals, such transactions would have escaped the tax. The Commission has indicated they will include this extra provision in the new proposal due soon under enhanced co-operation for the at least nine member states willing to sign up.
Of course we need a strong and sustainable financial sector in Ireland, in the UK and across Europe but we do not need dishonest industry lobbying designed to protect private profits. Lobbying on such crucial issues must become much more transparent.
The end effect for Ireland is that the state will lose up to €500 million in badly needed revenue. Irish firms engaged in financial transactions on the European market will still have to pay the tax but just not to the Irish tax authorities.
In Ireland, €13 million would build a new cystic fibrosis unit, €6 million would build a new 30-bed hospital for the care of older people, and €4 million would buy a new cardiac unit in Crumlin Children’s Hospital in Dublin.
This hospital has two specialised machines to provide both cardiac and respiratory support to children whose heart and lungs are so severely damaged that they no longer support life. They cost €200,000 each, and had to be paid for by private donations due to lack of public funding.
Imagine the difference an extra €500 million in revenue from a modest tax on the financial sector would make to the health services in Ireland.
Imagine the difference the estimated €50 billion would make to public services across Europe in the member states, or toward boosting the EU budget.
The kind of Europe we should build for our children is one where at least every person and every sector pay their fair share of taxes. I hope the Irish government, and other member states refusing to tax the financial sector, soon see the error of their ways.
Nessa Childers is a Member of the European Parliament for Ireland East.