18 Aug 2011

10% FTTs for bank users, zero for the banks

I'm sure that the banks are seriously worried about the possibility that Sarkozy and Merkel might succeed in their aim of introducing a financial transaction tax. They will no doubt claim that any such tax would be catastrophic for the economy etc etc.

Well, what about the financial transaction taxes that they impose on the public? Yesterday, for fun, I went to Toulouse airport and did the following. I purchased £100 from two different places, and then immediately, used the money to buy back euros.  The result? In both cases, I lost more than 20% of my money with just two transactions - in other words, the effective FTT was over 10%.

Here's the first one, with Travelex.

I was charged €129.70 to buy £100, but only got €102.77 when I sold them back. It's simply the consequence of the difference between the "we sell" (vendons) rate of 0.7710 and the "we buy" (achetons) rate of 0.9730 - 26% higher. They trumpet the fact that they don't charge a commission. They don't need to. Note that this would be exactly the same rates if I had done the same thing with £1000 - it would have cost me €269.30.

Here's the other one - with Banque Populaire.
In this case, buying the £100 cost me €131.99 (including a €7.50 fee), but I only got €105.99 back when I changed back to euros.

How can banks possibly justify such transaction costs?  Remember that the banks do $4 trillion in foreign exchange every day - it doesn't cost them anything. It's one rule for the rich, another for the poor.

I get the impression the these "sell/buy" ratios have gone through the roof - wasn't it more like 5% a decade or so ago? Who said that banks could charge anything they can get away with?

Here's a suggestion. In addition to imposing a modest 0.05 to 0.5% financial tax, how about saying that banks have to pay 50% of any transaction fees they charge to the government? That would generate a fair bit of revenue to help get public debt down and reduce the need for massive across the board cuts.

Finally, these outrageous fees for changing money are the best possible argument for the Euro. I am continously delighted to be able to pay for things and draw out money in all 17 Eurozone countries without extra costs. Of course, the banks would love the Euro to be broken up - that way they would be able to charge 10% every time people want to move from one country to another. We must not let them do it.

No comments:

Post a Comment