The IMF moves towards a Robin Hood Tax

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As the Observer notes today:

European Union finance ministers will step up talks on raising extra money from banks this week amid signs that the International Monetary Fund is softening its opposition to a "Robin Hood tax" on financial transactions.

Treasury sources said the chancellor, George Osborne, was prepared to back a financial activities tax on bank profits and pay at the Brussels meeting provided it was universally introduced, but was wary of a broader Robin Hood tax. Campaigners said last night, however, that a leaked IMF report showed growing international backing for a broader tax and urged Osborne to look at the revenue-raising potential of a levy of transactions.

An IMF paper, Taxing Financial Transactions: Issues and Evidence, said securities transactions taxes (STT) existed in many countries with little evidence that they distorted markets. It argued that a small levy on transactions might help to dampen the "herding behaviour" encouraged by computer-program trading. "Unilateral STTs, even if levied on fairly narrow bases, are certainly feasible as witnessed by their use in numerous developed countries. The fact that major financial centers such as the UK, Switzerland, Hong Kong, Singapore, and South Africa levy forms of STTs indicates that such taxes do not automatically drive out financial activity to an unacceptable extent," it said.

The paper added: "The impact on financial markets from a low-rate (less than 5 basis points), broad-based STT would likely be fairly modest, beyond its reduction of very short-term trading."

All of which says three things:

1) Those who have argued on this site and elsewhere that those of us who have argued for these taxes don’t know what we’re talking about are wrong – we clearly do – enough to convince he IMF and others;

2) Those who says these taxes won’t work are wrong.

3) Those who say these taxes will have serious impact outside banking are wrong.

I refer to my arguments in Taxing Banks on incidence. I suspect the IMF is now beginning to buy them – not least because it is becoming increasingly obvious that those who argued against such claims did so because a) the incidence of the change would actually fall ion them and b) their self interest was the sole basis of their argument.