29 Sep 2011

Things are starting to move

With Barroso's speech yesterday presenting plans for a European FTT, the debate is finally out in the open. Robert Peston has a piece on the BBC website, and there are no less than three in the Guardian. There's one from Bill Nighy called "A Robin Hood tax could turn the banks from villains to heroes", as well as others by Jill Treanor and Larry Elliot.

I've been frantically adding comments such as this one

The City and the UK government are no doubt going to try and veto the introduction of an FTT in Europe because it is European and they oppose any more taxes going to Europe.
This is shortsighted. Allowing a small EU-wide FTT to be introduced would allow the basic mechanism to be put in place. This would involve adding a few lines of code to the programs that do High Frequency Trading in the City to divert a tiny fraction of the $4 trillion a day in Foreign Exchange to the EU. It would also require bringing all the shadow trading into the light where it can be seen. It is simply impossible to justify the fact that we only get to hear about the true level of foreign exchange trading once every three years in the BIS triannual survey.
But once that mechanism is in place, there is nothing to stop governments, including the UK, using the FTT mechanism to replace all the other forms of taxation - including income tax, VAT, corporation tax, national insurance contributions etc. This would turn the UK into a tax haven for everything except financial transactions. Transactions in the UK are running at well over 900 trillion pounds a year, a figure more than 1700 times total tax revenue, currently 530 billion pounds per year . Even more interesting is to compare these numbers with the UK national debt that currently stands at 2.2 trillion pounds (if bank bailouts are included, which of course they should). Paying that off over 5 years would need around 500 billion pounds a year. That's less that 0.05% of the 900 trillion pounds in transactions.
Don't let the lobbyists get away with the argument that FTTs are only for raising revenue and paying off debt in Europe - it's the solution for the UK too. Indeed, since the UK is indeed the center for speculation, the British public should be pushing very hard to use such taxes for their own advantage.
For the details of the EUs propositions, there are now a whole pile of documents that have been put online.  There's a citizens' summary, an impact assessment and its summary, as well as an FAQ. Enjoy!

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