As the Guardian reports, the European Parliament yesterday backed the introduction of a €200bn (£172bn) a year financial transactions tax on banks to discourage speculative trading.
As they also note:
Campaigners for the tax — who describe it as a "tiny tax that could make a big difference" — urged the UK chancellor to endorse the vote, which was passed by 529 to 127 in a vote in the European parliament. The vote, however, is non-binding.
David Hillman, a spokesman for the Robin Hood Tax campaign, said: "The pieces are now falling into place for a Europe-wide bank tax.
"The German and French governments are both pushing this; Austria and Spain are in support and today the European parliament threw its weight behind a tiny tax on financial transactions that could help us fulfil our commitments to tackling poverty and climate change, and help prevent such huge cuts in public spending.
"It's time the UK stopped dragging its heels and joined the rest of Europe in ensuring the financial sector pays its fair share," he said.
I agree.
And I welcome the change in the environment on these issues that is very rapidly developing in Europe. The European Union is backing country-by-country reporting three years after the EU parliament did. I think the same trend is developing on the Robin Hood Tax.
The fact is people want transaprency.
They want accountability.
And that incudes wanting those who caused our financial crisis to both be prevented from doing so again, and to pay for the harm they have caused.
And rightly so.
And let's stop all that nonsense about incidence: before it is argued that the cost of this tax will fall on ordinary people think where the cost of the speculation and abuse, and bank bonuses, and excessive charges has fallen: all on ordinary people. The tax stops those excessive costs. That mean ordinary people gain from a reduction in the costs this new charge will put an end to. As a result they're bound to gain from it.
It may not raise as much as noted as a result: I don't care if that's the case. I do want a stable economy - and banks seek to undermine that. Yes - you read that right - banks seek to undermine that because they know the upside gain is theirs and the downside risk is societies. That's why this tax makes sense. As most MEPs noted yesterday.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
“That’s why this tax makes sense. ”
I’d rather we used a different word such as “Levy” or “Duty” – a charge used to correct a market externality to ensure that markets are not just free, but fair.
The word “Tax” should be retained for that which makes space for public expenditure and avoids inflation.
In this nomenclature we are grossly overtaxed for the amount of government spending that is happening (given the lack of work for people that want it), but there are quite a few levies, regulations and duties that need sorting out to ensure markets are balanced.
In the banks case you’d probably be better off with regulations rather than taxes – something simple like a 100% reserve requirement for all banks with a domestic banking licence and a requirement that they do nothing other than lend in a ‘Zopa’ like manner.
All other banks can then raise equity to cover their nefarious activities and blow themselves up at will.
Richard, there’s no chance this government, dominated by the ‘party of the City, for the City’, will actually put the interests of society as a whole before those of their paymasters in the City, is there?
In fact, the Europhobes in the Tory party will just see this as another case of ‘unjustified meddling in British sovereignty, blah, rant, moan, whinge..’, won’t they?
There’s not a chance of this tax working if the US is not involved too. Without them, we’d still be exposed to future credit crunches, but lose billions in tax revenues in the process. How do you think the US (and other financial centres)could be included
This might appear a more provocative comment than it’s intended to be. I’m just trying to get my head around the incidence argument. You say:
“[B]efore it is argued that the cost of this tax will fall on ordinary people think where the cost of the speculation and abuse, and bank bonuses, and excessive charges has fallen: all on ordinary people. The tax stops those excessive costs. That mean ordinary people gain from a reduction in the costs this new charge will put an end to. As a result they’re bound to gain from it.”
If I understand you right you’re accepting that banks WILL pass on this cost but suggesting its very existence will put a stop to ‘speculation & abuse’ etc? Can you explain more or perhaps direct me to a post where you’ve done so before?
I ask because I’m very persuaded by the arguments of those who oppose this tax on the grounds the costs will just be passed to consumers. If there’s a flaw in that argument I’d love to see it. But if banks are able to protect their margin by just passing the cost through to their customers (be they high street current account holders or international speculators) I can’t see why they’d be incentivised in any way to change their behaviours?
@Nick
Not true
Harder on the dollar of course – but easy on all Euro, Sterling, and other EU currencies
I admit little chance of US right now
And yes I admit that will get 2/3 of revenue
But still massively valuable
@Liam Murray
There’s a big bit in here http://www.taxresearch.org.uk/Documents/IMFTaxingBanks.pdf
But fundamentally my point is the argument is wrong: the real question is who pays the costs now on which this tax will be paid – costs which are proven to give rise to no benefit for society. E.g. we do not need the liquidity supposedly created – in fact as the crunch showed, that liquidity is itself very dangerous
Those costs are borne by ordinary people, and their pension funds etc
The reality is of the tax rate was sufficiently high many trades would end – so the costs would not arise. I agree, the tax yield would fall too – but tat’s not my concern. I don’t want revenue per se. I want risk reduction absolutely. And I think this tax can deliver that. We can raise the revenue by tackling other tax abuse
So the incidence question is wrong a) because it ignores who pays the costs of these transactions now and whether they’d be better off without them and b) the tax will stop the costs so there will be much less to pass on anyway – a net gain to ordinary people
@Richard Murphy
Thanks Richard. I’m not pressing to be pedantic or trollish here (just broadening my own understanding) but I still don’t think we’ve arrived at an answer. You say:
“The reality is of the tax rate was sufficiently high many trades would end – so the costs would not arise”
But why would they end? The bank would have no incenctive to end them because they’d just protect margin by increasing costs in proportion to the levy they’d have to pay. Consumers (of whatever level) would have no incentive to stop because the cost of the tax – by its proponents own claims very small – would have negligible impact on their profits.
Like I said Richard my understanding is very simplistic and that might be the route of my confusion here. But from that simplistic view my take is this – if the government levied a 0.005% tax on Tesco & Asda for every pint of milk sold me, as the consumer, would soon pay 0.005% more for my milk. I’d still need it, the supermarket would still sell it at an identical margin and the government would have some revenue, raised in essence from me and all the customers who bought milk. Not Tesco or Asda…
@Liam Murray
If the tax on milk was more than the margin that could be made on milk (unlikely as it’s a basic commodity – so let’s call it orange hair colouring to produce a product of similar irrelevance to most financial products) then the market would stop
A Robin Hood Tax might well achieve that aim
They trade margin and the tax would take it away – so end of product — or at least vast amounts of the volume – and especially the hedged versions
You miss the point – the world does not need these trades
The debate on this tax has been going on for years. The consensus is that it might do some good, no one has explained how it will cause severe damage. Let’s suck it and see. Perhaps it will have calamitous results but then we could just stop it. No one will die, I’m sure.
Like to comment on the link below?
Seems to directly oppose what you’ve said! (not directly at your blog though)
Particularly interesting to see Sweden had previously tried a Robin Hood (or Tobin) Tax and reversed it as it was seemingly spectacularly unsuccessful and raised nowhere near the expected amounts.
http://www.cityam.com/news-and-analysis/allister-heath/why-britain-must-reject-tobin-tax
@BigC
Oh come on – he’s an anti-state flat tax neoliberal with no ability to see any issue objectively
He thinks all taxes are evidence of failure
Which means all he writes is safely ignored
“You miss the point – the world does not need these trades”
“a product of similar irrelevance to most financial products”
What nonsense. Financial products wouldn’t trade if there wasn’t an underlying demand for them. Interest rates swaps and CDS is used heavily by pension funds to hedge risk of the underlying instruments. Simply put, if these derivative products didn’t exist, then these funds wouldn’t be able to hold as much government or corporate debt, wouldn’t be able to generate as good returns for their customers and debt financing for sovereigns and corporates would be more expensive. Ans that’s just one example.
Sure, people speculate on markets….but that is simply short term investing. Going to try and ban that?
It’s the same surious and very short sighted argument as regarding short-selling. Politico’s think that banning it will help market stability, blaming speculators. What happened in reality when it was briefly banned?
Yes, that’s right – the market fell even more. Why? it was a sign of weakness, long only holders decided to sell and the only natural buyers – those looking to cover their shorts – weren’t there any more.
Fortunately all this talk of a Tobin tax is moot. If unilaterally implemented then the finance industry will simply move offshore to where there is no Tobin tax, as in the Swedish example. In fact, I hope they do try and implement it unilaterally in Europe….it would immediately force the UK out, and make us massively more competative at a stroke.
The wikipedia article on Tobin Taxes has a section on the Swedish experience, it seems to be well sourced and matches the City A.M. article’s description of events. Care to address the issue Richard or do you just want to continue mudslinging?
@Tyler
Amazing how we got by very nicely without them in 2000
Staggering how the boys in the City forget that
@Charles Ward
Sweden is a small state with a non reserve currency
It was never going to work
Sterling and the EU are reserve currencies
Utterly different
Why not try comparing like with like?
@ Richard
Derivatives have been around for decades. It’s not like they started in the last few years. Try the 70s maybe.
And sure, you can get by without derivatives. Except without them the underlying market is much less liquid. Specifically, without interest rate swaps and CDS pension funds wouldn’t be able to hold anywhere near as much debt, so funding costs for companies and governments would be significantly higher.
@Tyler
Oh come on….
Derivatives are one thing
But that does not explain the rash of products in the market
Stop uttering complete nonsense