What do we think about the Tobin tax ('Robin Hood tax') then?

[PollyTroll]

Explanation here

Bill Nighy/Richard Curtis video here

That Wiki page made my head hurt. Is there a simple explanation, more applicable to the current UK situation?

I received an email from Twitter today asking my opinion about it, so I figure it is fairly topical but has gone over my head completely (despite my attachment to R5L).

Basically, it's a micro-tax on all financial transactions - so every time a bank/hedge fund/financial institution buys or sells shares or currency, 0.5 per cent of the value of the deal would be taken in tax.

People reckon this would raise billions that could be spent on international development, climate change mitigation and paying off the national debts incurred by bailing out the banks over the last couple of years.

The downside is that it would have to be introducted globally, as many financial transactions cross national borders. The US is not thought to be keen, although there has been some movement on this within the Obama administration.

Can't see that there are any other serious objections to it myself, but I'm sure someone will be along to outline some soon

Read about this today. Was put off by Bono getting invloved. Don't/didn't U2 purposely "reside" in Holland to avoid tax? But then I'd be put off anything once Bono got involved. Otherwise, yes, good idea in theory but needs everyone to do it = teh sticking point

lol at being put off by Bono. Bono actually talks a lot of sense on development stuff. (Agree that U2's tax arrangements are smelly though.)

So it's not unlike VAT?

Hmm. Not too keen. When someone trades in equities, they are already subject to capital gains tax, and their dividends are subject to income tax.

I can see that this proposed tax would discourage short-term trading (day trading), but there are other ways for the government to discourage this type of technical activity. The US taxes day trading differently from the UK and it seems to work.

If the government really wants to discourage unearned income, then they can meddle with the capital gains rates. They don't need to go to all the effort of taxing trades. This will just be a headache for brokers to collect, which will have a knock-on effect on their fees.

It will be the nail in the coffin for the 'ordinary' person from wanting to invest in the stock market, and will kill aspirations.

I guess this is not surprising from this government.

More like stamp duty I think

Mme, the Wiki page says it's a tax on 'foreign currency transactions' and the RHT page says it's a tax on 'speculative transactions' - admittedly I'm a complete dunce at finance - does this have any bearing on your objections?

The massive sums that could be raised for international development and debt relief (at home and abroad) seem to override the anti-arguments, for me at least.

Would have to be globally, otherwise any country introducing it has just made themselves just a little bit less attractive.

Yes, i think the global (or at least pan-G20) point is widely accepted. Perhaps no coincidence that Labour have been making more noises about going after tax havens in the last couple of weeks.

Right, have questioned a friend who's working on the campaign more closely and he says that this would not not be in addition to the share tax that's currently in place in the UK - it's a campaign to introduce the tax to other trades (eg derivatives) and encourage other countries to introduce the equivalent in their jurisdictions.

Have told him that the Robin Hood site needs a bit more policy detail and he agreed wholeheartedly

A more lengthy anti-view here - interesting.

I suppose I think that international development and climate change mitigation are overwhelming priorities, and I don't really care if the money doesn't come from an impeccable source. It would be great if we could persuade the public in developed economies that they should just pay more proportional income tax, but it doesn't look as though that's going to happen any time soon.

This government will never do it. They are committed to low tax rates for the super-rich. Interesting concept though, will have to read more about it I think before forming an opinion.

GB is very in favour, DaisyMoo - he's been flying round the world trying to drum up support for it for months. I know what you mean about Labour's record on the super-rich, but that's changed a bit since the banks failed and Gordy had to spend all our money bailing them out

As others have already said, the only way this could work is if this was done globally. no point in just UK/US doing this as the traders would move to say Switzerland or whereever.

Given the world leaders cant agree on anything simple, let alone the same tax, I can't see this happening.

Until then its rather a moot point. Great idea in theory though.

What implications does it have for things like pensions?
These have gone down so much in recent years, and most of them depend on shares. Anything that takes more cash out of pensions will only cause more problems. And in the end, the big corporations will find a way round it and the small investors or even just Joe Bloggs on the street will find things like insurance premia are going up to compensate the big firms who want to keep their profits.

In the end, everyone pays, regardless of whether they think they go near the stock market.

I'm not that surprised that Gordy thinks it's a good idea at the moment. If it ever got close to actually happening though, the hedge fund managers would have a chat with him over tea and biscuits and he'd soon go quiet

Am a bit fed up with everyone moaning on about bailing the banks out - it was an equity based loan and if/when the banking sector recovers the government would make billions - effectively it is just an investment that they were forced due to the financial markets and a very small part of them causing the shit to hit the fan make and another tax on the financial industry is not going to help anyone let alone that sector to recover and the government be able to sell their stake in the banks and recoup their money.

I think it is (and always has been) a good idea and interesting that it has come into favour again now. As I understand it the aim would be to take the profit out of purely speculative transactions, that have no real-world benefit, whilst keeping it at a low enough level not to distort transactions that are genuinely profitable.

IMO anything that tilts the balance away from short term speculation and towards long term investment is going to be beneficial to our economy, which has always suffered from short term 'beauty pageant' tendencies.

So for example with pensions, it would be preferable for pension money to be invested in genuinely sound companies, that then pay dividends over the long term which make up the income for the fund, regardless of short term share price movements.

I think that DaisymooSteiner has the right of it on the likelihood of it actually happening, though.

Yes, pensions would be my concern as well, although my understanding is that UK pension schemes have only recently started to get involved in hedge fund investments - part of the reason why people aren't getting as much from their pension as they would have hoped.

Hm. I'm not too sure about this.

For a start, most financial transactions are subject to tax anyway (CGT, for e.g.), and as most transactions are cross border (particularly fx) it would be very difficult to enforce. There may also be problems, depending on how you collect the tax. Logistically, to do it in real time is very difficult - it would most probably rely on systems that would be able to do this (£mils of development). That is also not very practical or fair - as someone be doing a long term fx exchange, rather than a short term.

Or, you could collect retrospectively in the way that VAT is collected. BUT, there is currently a huge problem in the EU with carousel frauds being perpetrated in the carbon credit trading system video about it because of innate problems with VAT collection in the EU.

A better solution, IMO, would be to reduce corruption globally. Countries like Nigeria etc. are haemorrhaging tax revenues and aid as a result of corruption.

And I agree with MadamCastafiore - all this bollocks about bailing banks out.

1. The financial services industry is the largest contributor of Corporate Tax in the country ... so, it is likely that any money used to provide support or liquidity was originally paid in by financial institutions
2. The government didn't just hand over money/acquire shares - they will sell the shares back onto the market at some point, and if they are in any way intelligent, make a profit on them. For loans, the banks pay them back and pay interest on it. That's the way banking works.

This story, widely reported today, suggests that some sort of global banking tax (if not actually a Tobin tax) might be achievable.

Duncan Green posts here about 'how change happens' (one of his preoccupations); 'The introduction of other kinds of taxes suggests that is most likely to happen after a shock (e.g. an income tax was introduced in Britain in 1798 to fund Britain?s war with France).'

'And as we know from campaigns on debt relief, access to medicines etc etc, they always say no. Until they say yes. And then claim they supported the idea all along.' (From this post.)

Serenity, no sensible person would deny that corruption is a problem in some developing countries (as, indeed, it is in some developed countries). There's an interesting debate to be had, though, about whether it's as big a problem as tax evasion and avoidance by corporations and super-rich individuals in the same countries. Christian Aid commissioned research that suggested that tax evasion costs developing countries £160bn pa.

The wholesale implementation of global measures to root out tax evasion would obviate the need for the Tobin tax, I'm sure. But at the moment, the latter looks slightly more achievable than the former.

'bollocks about bailing the banks out'

Sorry, forgive me, but I'm sure we DID actually bail the banks out? RBS was still in existence last time I went down the high street... which looked very unlikely until the government pumped money into it.

The financial services industry may well be responsible for a big part of the tax take ? that's because successive governments have run the economy to benefit that industry and allow it to grow exponentially. At the expense of other sectors such as manufacturing. When those sectors run into trouble, they are told 'tough shit, that's capitalism for you'. Strange how those rules don't seem to apply to the very people who created them.

The dominance of the financial services industry has been a bad thing for Britain and anything that means our economy becomes less dependent on it is a positive development IMO.

As for the idea that everyone should be grateful that financial services pays tax... big wow. Everyone sector of industry and every individual pays tax. Even if you are below the income tax threshold, you still pay taxes on what you spend.

The bank bail out may have been necessary, but I wish the industry and workers would show a little less hubris and recognise that it owes the country a huge debt.