Transaction Taxes » Tax Research UK

EU Robin Hood Tax would boost growth, say experts

Feb 072012

I have shamelessly lifted the following from Owen Tudor on the TUC’s Touchstone blog:

A new report, launched in Brussels on Monday by the Socialists and Democrats in the European Parliament, shows that – contrary to what the finance sector’s paid lobbyists have been insisting – a European financial transaction tax (FTT) would boost growth in Europe by at least 0.25%, raise the revenue to combat poverty and climate change at home and abroad, and help re-balance the economy by making long-term investment more worthwhile than short-term, high frequency trading. This new report by noted economists Prof Avinash Persaud and Prof Stephany Griffith-Jones comes on top of revised estimates from the European Commission who originally produced some of the data that fat cat financiers pounced upon. The Commission’s original impact assessment was based on a flawed model which shows all taxes as harming growth, whatever the revenues are used for, but misunderstandings of what the impact assessment showed were used to create concern among progressive politicians and abused by people opposed to the tax all along to justify their position (even though the same people shed few tears over the impact on growth of measures they support like increased VAT or cuts in public services.)

Welcoming the new report, Socialist MEP Anni Podimata, who will draft the European Parliament’s report on the Commission’s proposed FTT, said:

“This study confirms what we have been saying all along. The financial markets have to make a fair contribution to the crisis they provoked. An FTT will reduce the fragmentation of the internal market. Put together with other tools, it will act as a disincentive to high frequency trading and other practices which increase risk without ensuring liquidity. This would contribute to a better financing of the real economy, encourage investment and job creation in the EU. The S&D Group is against putting the entire burden on ordinary taxpayers, and calls for measures to boost growth. In this sense, an FTT is an integral part of this approach.”

The Commission’s new approach was set out last week in a combative article in several national newspapers around Europe by EU Tax Commissioner Semeta - only a year ago an FTT-sceptic – who wrote:

The more the financial transaction tax approaches implementation, the shriller – hardly by chance – the rhetoric of its opponents. They twist the Commission’s official data and thereby invent apocalyptic scenarios concerning the impacts of the tax on growth, employment and competitiveness.

The FTT will neither damage growth and competitiveness nor lead to more unemployment. From an isolated perspective every tax causes economic costs. However, the costs of the FTT are small and, absolutely legitimate, given the enormous support the financial sector has been granted in the recent years. Furthermore, the costs have to be offset against the positive effects from the use of the revenues of the FTT.

The Griffth-Jones/Persuad paper also disproves the suggestion that an FTT would hit pension funds or pensions, and urges the European Commission to use the model of the UK stamp duty to prevent evasion by forum-hopping, rather than the Commission’s current proposal of a ‘residence principle’.

Memo to President Sarkozy: you can ignore Cameron’s objections to a Financial Transaction Tax

Europe, Transaction Taxes, VAT 14 Responses »

Oct 312011

Much of Europe wants a financial transaction tax (FTT). The reason why is obvious: they need the money.

The UK is adamant it will have no such tax. It says it will harm the City of London. Of course that’s not true: it’s the City of London that harms us, but Cameron ignores that fact and in the process spites the plans for an FTT to be discussed by Nicolas Sarkozy at the G20 later this week.

How can the impasse be broken? Well, let me suggest a simple solution. It’s called VAT.

VAT is, of course, an EU tax. And it is an EU tax with a difference: it can be imposed by majority vote. Unanimity is not required here. And that’s the critical point. Sarkozy can change VAT with dissent from the UK.

The relevance of that simple fact is this: VAT is not charged on financial dealing and it could be. Of course that is not quite what an FTT is expected to be, but the reality is that most financial dealing is about margin trading. So too are many other trades, such as second hand car dealing, and we have worked out ways to apply VAT to such dealings. OK, financial dealing is more complex – but it is also incredibly well tracked. So, it would be quite possible to apply VAT to the margin on bank dealing.

And they could not get round it easily. First, the rate would be low, and so too would be input tax as a result.

Second, relocating can be overcome – it would simply be deemed that settlements through Europe were located in Europe. And then what are called the ‘self supply’ rules would apply – the bank would have to register and charge itself the tax and pay it over.

I’m not saying banks would not try to avoid the charge: they would. But quite a lot could be done to prevent that happening.

I haven’t worked out all the detail. I don’t need to do so. All I need to do is tell Nicolas Sarkozy he has a way of getting what he wants from Cameron. The stick might be enough.

Taxing banks

Banking, Transaction Taxes 25 Responses »

Sep 292011

A Robin Hood Tax – a financial transaction tax – is back on the agenda thanks to the EU, and rightly so.

I wrote about this in 2010 in a joint publication called ‘Taxing Banks‘. In it I set out the data supporting such a tax, estimated how much it would raise and suggested – contrary to the claim of bankers – that the charge would not end up falling on bank customers but on the banks themselves.

Nothing much has changed in the meantime – except the extent of regret at not acting sooner – so I offer the publication again now.

Financial Transaction Taxes and corporate tax harmonisation rates – now we’re talking

Corporation Tax, Europe, Transaction Taxes 24 Responses »

Aug 172011

The reality that banks are out of control and that you can’t run a common market without some degree of commonality in tax has finally dawned on the EU.

Merkel and Sarkozy moved towards a financial transaction tax on EU banks yesterday, which is a welcome and overdue move that needs replication way beyond the Eurozone if the feral banking economy is to be brought under control.

And there are also clear signs that corporation tax harmonisation is on the agenda – which makes a complete mockery of moves in the UK by Northern Ireland and Scotland to move against that necessary pre-requsitie for a level playing field for business.

Both moves are in the right direction. Of course the devil will be in the detail. But these are obviously correct initiatives at this time.

As much as the move being made towards balanced budgets, to which i will turn next on this blog, is the wrong one.

A Robin Hood Tax is deliverable says IMF

IMF, Transaction Taxes, TUC 1 Response »

Aug 122011

As Owen Tudor at the TUC has noted:

The IMF has issued a working paper which explores the practicalities of implementing Financial Transaction Taxes.

His analysis is well worth reading. But as he notes, the IMF concluded:

In principle, an FTT is no more difficult and, in some respects easier, to administer than other taxes.

As some of us have argued for quite a long time.

Now, please do it.

1,000 economists call for a Financial Transactions Tax

Transaction tax, Transaction Taxes 21 Responses »

Apr 132011

1,000 economists (with me included in that number) have written to the G20 and Bill Gates to call for a financial transaction tax.

We said:

Dear G20 Finance Ministers and Bill Gates,

We write to you as the call for a Financial Transaction Tax is now gathering global momentum, and the French government has made it a key priority for their G20 presidency.

This tax is an idea that has come of age. The financial crisis has shown us the dangers of unregulated finance, and the link between the financial sector and society has been broken. It is time to fix this link and for the financial sector to give something back to society.

Even at very low rates of 0.05% or less, this tax could raise hundreds of billions of dollars annually and calm excessive speculation. The UK already levies a tax on share transactions of 0.5%, or ten times this rate, without unduly impacting on the competitiveness of the City of London.

This money is urgently needed to raise revenue for global and domestic public goods such as health, education and water, and to tackle the challenge of climate change.

Given the automation of payments, this tax is technically feasible. It is morally right.

We call on you to implement the FTT as a matter of urgency.

Yours.

Fink Camp – taxing banks

Banking, Transaction tax, Transaction Taxes 2 Responses »

Apr 042011

Just done a gig under the above title for the New Economics Foundation at Amnesty International’s offices in London.

The subject – taxing banks.

Dave Hillman of the Robin Hood Tax gave that subject a good airing.

Tony Greenham of nef covered all their dimensions – and there ae many.

And I guess I talked all things tax – as is my usual pitch on such occassions.

What’s the outcome? Well this:

- Taxing banks won’t solve all our ills – but billions can be raised

- If banks paid more tax they’e better realise their connection to society, or it least compensate it if they did not

- If banking secrecy in all its forms was shattered we’d find it much easier to clamp down on tax evasion

- A Robin Hood Tax can work, and without being universal

- Banks won’t run anywhere if we tax or regulate them as there’s nowhere to go

- Trying to run the UK as the successor to Ireland – as George Osborne seems to be doing – will leave us in the same place as Osborne

- Creating a progressive tax system on bankers is essential

- Right now banks and bankers seriously underpay tax

- This is also true in Europe bu there the will to correct this exists

- Why won’t George Osborne share that sentiment here – the levy is no substitute for real change?

Thanks to nef.

And good to see they supported St Peter’s Brewery, Bungay when selecting the booze. It’s not a Norfolk brewery by a mile or so, but it’s good all the same.

Europe backs a Robin Hood Tax

Banking, Economics, Transaction Taxes 17 Responses »

Mar 092011

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.

The bank levy: surely this is targeting the wrong thing?

Banking, Transaction Taxes 21 Responses »

Oct 212010

The government has published legislation for the new thank you levy.

They say it will raise £2.5 billion a year – curiously, a figure lower than that raised by the bank bonus tax that Labour charged, although George Osborne said to the contrary in the House of Commons yesterday.

But of all,this is a pathetically small sum to levy upon the banks when they have £19 billion of tax losses to offset against their future tax bills, as I’ve shown.

Secondly, I am worried that this is an inappropriate tax. I know it is only targeted on certain parts of the balance sheet, but surely the risk is not within the balance sheet, it is within the trades that take place during the course of the year. Tackling the balance sheet will simply reduce a bank’s capacity to pay, how ever we look at it. Charging a tax on inappropriate trades discourages the specific trades. That has to be the right course of action. In that case we clearly need a financial transaction tax – or a Tobin tax or Robin Hood tax, whichever name you wish to apply to it.

As usual,this government has got things wrong.