A report titled ‘The EU Financial Transactions Tax Proposal: A Preliminary Evaluation’, commissioned from the ESRI and Central Bank of Ireland by the Minister for Finance was published recently. The Report was prepared some time ago in response to the Minister's request for an initial assessment of the Commission's current proposal to implement a FTT in the EU. If nothing else it's a useful (if somewhat cautious) primer on the issues.

The Commission proposal involves a transaction-based tax of 0.1 per cent on securities and 0.01 per cent on derivatives. The Central Bank/ESRI report notes the potential to change behavior and “financial innovation” to avoid the tax may significantly alter the estimated revenue base, and, as a consequence, the actual revenue collected from the tax. Apparently this is one of the key findings of the economic literature and country experiences following the introduction of FTTs.

The analysis suggests that “the net gain in tax revenue for Ireland as a result of the introduction of the proposed financial transactions tax is likely to be modest and significantly offset by the loss of stamp-duty revenue.”

The Report ‘The EU financial transactions tax proposal: a preliminary evaluation’ together with an accompanying press statement are available from http://taxpolicy.gov.ie