19 Dec 2010

Updated Information for Financial Transactions

I just had a look at the latest figures from the Bank for International Settlements which tries to provide detailed information about financial transactions for a subset of countries. It was their data that I used for the paper I wrote back in octobrer on the possibility of using a Flat Rate Financial Transaction Tax to replace all other taxes. My original conclusions were based on the data for 2008 (actually up until the 1st January 2008). The latest figures came out on the 7th of December and provide data for 2009 (actually dated the 1st January 2009). The new data show the effect of the financial crisis in 2008, because there was clearly a substantial drop in the amount of activity. Nevertheless my basic claim still holds up, because despite the crisis, the total amount of transactions for the countries covered by the BIS was  8512 trillion dollars, whereas total government revenue for the same set of 21 countries was 11.7 trillion dollars - ratio of 729 to 1.

I also updated the figures for the Goverment Revenue numbers, using the tables provided by the CIA that you can find here.

There are a few points worth stressing. Firstly, the new table includes some countries that weren't in the previous version. Specifically, the BIS has now added data for Brazil,  Mexico, Russia, South Africa, South Korea and Turkey, making 21 countries in all.

Secondly, the totals for the financial transactions are very clearly underestimates. Although I added everything that was listed in the tables provided by BIS (which you can download here,)  there are clearly large amounts of data that are missing. For example, have a look at Table 18 for the United Kingdom. It should provide information about the Total Value of Executed Securities  and Derivatives Trading for the London Stock Exchange. Unfortunately, it just says "nav" - not available. Funny that. It's probably a totally mind blowing number. But the fact is that even without including that, the ratio of Transactions to Government revenue for the UK stands at 1619:1. That's right, financial transactions within the UK are over 1600 times higher that total government revenue.

Just imagine. A flat rate financial transaction tax in the UK at 1% would generate 16 times as much revenue as tht UK government currently gets from all existing taxes. Even 0.1% would allow all the current taxes to be abolished and still have money left over to pay for universities, social services, pensions etc etc...

What are we waiting for? Why are university fees going up to £9000? Why are 100 000 local government workers in the UK going to get a letter announcing that they will be made redundant in the next couple of weeks? Why are social services being cut back? And why are the traders in the city going to be given obscene bonuses yet again?? Because we are stuck with a stupid taxation system that needs to be scrapped and replaced by a simple, fair tax on financial transactions that would provide all the financial resources we could reasonably need.

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