Robin Hood tax myth buster
Make Wealth History campaign combats the anti-tax propaganda
Sarkozy is now pressing ahead with the tax in France and the Green Party has released new research on just how much we could make to save save our public services. However the ConDem government is still dead against it.
Here Make Wealth History campaign bust some myths surrounding the Robin Hood tax.
Myth 1: The financial transaction tax will cost me money
No, you wouldn’t be taxed for drawing money out of a cash machine or paying in a cheque, something I’ve heard as an argument against the tax. It wouldn’t apply to retail banking or personal money transfers. It is squarely targeted at the commercial banks.
Why? Because when you and I go to the corner shop, we pay VAT on the items we buy, but the trade in derivatives isn’t taxed at all. VAT is levied at 20%. The transaction tax would be at 0.05%, but it still has the world’s richest corporations whining that they couldn’t possibly afford it. Don’t believe them.
Madness, Mr Cameron? I’ll tell you what’s mad. Through his future taxes, my little boy will pay for the banking bailouts for the whole of his working career, and he wasn’t even born at the time of the financial crisis. Meanwhile, the derivatives traders who brought the global economy to its knees carry on making their billions, contributing next to nothing to the cost of their own rescue.
Myth 2: The financial transaction tax will cost British jobs
The claim here is that if any country puts a FTT in place, business will simply move elsewhere to avoid the tax. That would certainly happen if the tax was set too high, but it would have to be really quite high to cancel out all the advantages of doing business in Europe – the talent pool, the infrastructure, the ease of doing business. Besides, if you moved to New York and wanted to deal with the EU, you’d still have to pay the tax. It applies to trades within Eurozone jurisdiction, wherever in the world the buyer happens to be.
There’s also plenty of precedent to show that threats of banker flight are overblown. When Labour announced a one-off 50% tax on bonuses for example, City analysts predicted a mass exodus. It never materialised. Tullett Prebon apparently gave every member of their 950 staff the right to leave London to avoid the bonus tax, and not a single one of them did.
Myth 3: A financial transaction tax will penalise pension funds
With Britain’s pension funds in such a fragile state, anything that stands in the way of them flourishing is going to be controversial. However, a transaction tax would have little impact on pension funds. Because they need steady, dependable income streams, pension funds tend to hold shares for the dividends, rather than buying and selling them for quick profits.
An FTT would fall most heavily on trading houses that make multiple, rapid trades, particularly computer-controlled ‘flash trading’. Since this is predatory and destabilising, slowing it down is a good thing.
Myth 4: The transaction tax will undermine growth
I’m not one who believes that all things must kowtow before the growth imperative, but it is one of the frequent objections. This is exaggerated too. Cameron’s claim that it will cost 200 billion Euros is from the European Commission’s worst case scenario, and the Prime Minister neglects to mention that it’s spread over 10 years. EU tax commissioners now suggest that if there was any impact on growth, it is likely to be less than half of one percent of GDP growth. And this has to be understood in context. The financial crisis will cost Britain several trillion by the time it has run its course. If the tax helps to recharge the public coffers and prevent a further collapse, it will be worth every ‘lost’ penny.
What’s more, the tax will generate pretty impressive revenues, and those funds aren’t going to be just stuffed into Sarkozy’s mattress. They will be reinvested and used to stimulate growth. So perhaps the financial services sector will see fractionally slower growth, but if the funds raised are used wisely, other sectors would compensate for it. An FTT could be a useful way of rebalancing the economy and breaking the dependency on finance.
Myth 5: A transaction tax would send our taxes to Europe
The tax would be collected nationally, so no – it would not be an EU tax on our business activity. In fact, when Sarkozy announced the new French FTT yesterday, he said it was to help reduce the deficit.
With a vast deficit of our own, that’s something we could consider ourselves. We already have a financial transaction tax in the form of Stamp Duty on shares, and it raises £3 billion a year. (Strangely enough, no politicians are campaigning for an end to Stamp Duty) Perhaps we should extend it to other forms of financial trading. It would certainly be a less painful way to reduce the deficit than many of the other policies we are currently pursuing.