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.
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That does not change anything to the fact that the current US administration is against this idea, and that the Republicans who will take over Congress in 9 weeks are completely hostile.
Without US participation the potential revenues from the tax become very limited (the Dollar is involved in 85% of currency transactions). Still, the tax could be introduced unilaterally by small economies like the UK, but this, in addition to the issue of incidence, would present very significant challenges in terms of implementation and enforcement that its proponents have not addressed.
Richard, you write: “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.”
I think that you would do your case more service by trying to strengthen the arguments in support of a financial transactions tax, than by assuming that those who disagree with you must be driven by base motives.
@Tim Johnson
All the evidence is that those who oppose this tax are driven by base motives
Like a belief in their own bonuses or the neo-liberal agenda
The single most influential opponent to this tax is the US government.
And under the Obama Administration, it is definitely driven by neither of these things.
IMF FINAL REPORT FOR THE G-20, June 2010
30. an FTT does not appear well suited to the specific
purposes set out in the mandate from G-20 leaders…not the best way to finance a resolution mechanism…not focused on core sources of financial instability……………..etc.
Its real burden may fall largely on final consumers rather than, as often seems to be supposed, earnings in the financial sector…the cumulative, ‘cascading’ effects of an FTT—can be significant.
It is a weakness of the FTT that it taxes transactions between businesses, including indirectly through the impact on the prices of non-financial products. The argument that an FTT would cause little distortion because it would be levied at a very low rate on a very broad base is not persuasive: it is a central principle of public finance that if the sole policy objective is to raise revenue then taxing transactions between businesses (which many financial transactions are) is unwise: distorting business
decisions reduces total output, so that more could be raised by taxing that output directly. A tax levied on transactions at one stage ‘cascades’ into prices at all further stages of production.
@thims
And the evidence is they’re changing their minds – rather rapidly
Which was the whole point of noting that fact
Which seemed to pass you by
Who is changing their mind?
Not the G-20.
@Ted G.
The IMF
@Richard Murphy
Please show me the IMF.org report since the June 2010 final report. I find it hard to believe that the IMF would suddenly contradict all of their previous studies. Sweden and many countries are fiercely opposing a tax on transactions after they had huge failures with their transaction tax experiments. It’s not going to be different this time.
Anyway, the people will pay. Same as the people pay stamp duty on shares while businesses and traders are exempt. 71% of all UK shares traded are exempted or bypass stamp duty. Same thing would happen with a new additional transaction tax. Make the people pay twice.
Tobin Tax-Robbing Hood-FTT-STT proponents always like to reference James Tobin: Austan Goolsbee is serving under President 0bama as a member of the Council of Economic Advisers and as chief economist of the President’s Economic Recovery Advisory Board. Goolsbee speaking on transaction tax: “Tobin himself was my adviser, hero, mentor. Tobin himself would often say, ‘Well I don’t know if it exactly could work.’
Even the Tobin Tax man himself doubted his own idea instead of vigorously promoting and refusing to admit that he was wrong.
@thims
At the risk of being rude – I suspect that things are changing behind the scenes
That’s the implication of the article
Knowing Larry that’s what he’s picking up
That’s the way the world works
Ideas change – and only the foolish fail to change their mind in the face of the facts
The rest of your comments are repetitive and not worth commenting on
I too have not been able to track down the IMF Report. Anyone got a link to it? Thanks Tim