23 Oct 2011

The "Thorpe" Plan

OK, I agree that the "Thorpe" plan sounds pretentious. I would be very happy to call it something else, if someone else was proposing the same thing. Lots of people are now pushing for the introduction of a Financial Transaction or Robin-Hood Tax. The problem is that while it is just seen as a way to punish the financial sector, the lobbyists have the power to block progress, especially via their friends in the UK government. Here, the key is to trade the abolition of virtually all the main sources of taxation for agreement to impose regulations on financial transactions. It seems to me that not only would such a scheme be seen as highly beneficial to virtually all citizens, it would also appear very attractive to  the business sector. This is what would put those in financial sector who have been (successfully) campaigning for total deregulation of the markets in an untenable position. So, here it is. Comments welcome.

The "Thorpe" Plan 

The overall aim should be to replace all the current taxation methods with a single flat-rate Financial Transaction Tax. The only taxes that should be kept are those that serve specific social functions - such as taxes on tobacco and fuel. This can be down using the following measures.
  • Impose a Europe-wide FTT at the 0.1% rate proposed by the EU that would replace the current VAT revenues to Europe.
  • For countries with very large financial sectors, the amount paid to the EU should be capped so that the amount transfered to Europe is proportional to each countries GDP. 
  • The extra revenue should be kept by the individual countries for (a) reducing or eliminating the exisiting taxes, (b) paying off national debt, and (c) launching investment programs in key areas such as energy, transport, education and research.
  • Each government should negotiate with the financial sector and business with the following proposal. The government would abolish taxes on company profits (such as corporation tax), income tax, VAT  and employer contributions in return for agreement on a number of key areas.
  1. All financial transactions would have to go via authorized and regulated mechanisms that are subject to the FTT
  2. A ban on a wide range of socially undesirable financial instruments such as Credit Default Swaps, CDOs, Short Selling etc..
  3. The abolition of the Fractional Reserve Banking system that allows  banks to create money. Only the elected government should have the right to create money.

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