8 Nov 2011

A message to Osborne and his supporters who are trying to veto the introduction of an EU-wide FTT

Here's my latest comment to the Guardian, following the news that George Osborne is going to fight to block the introduction of a 0.1% FTT. He intends to use the European Commissions own analysis that such a tax could reduce GDP by 1.76%. As I point out in my comment, I think there are serious grounds to doubt the accuracy of the EU's predictions. Anyway, here's the comment.

I've said this before, but the UK would be insane to block the introduction of an EU-wide FTT at 0.1%. The only thing that needs negotiating is the fact that any payments to the EU should be capped at the level required to pay the UK's share of the 141 billion EU budget. On the basis of relative GDP, the UK should pay13.83% of this, namely, about 19.5 billion euros. The rest, the UK could keep.
So, how much is this? Well, the EU's own numbers are massively underestimated. Their value of 47 billion was based on (a) numbers from the Federation of European Stock Exchanges, and (b) the Triennial report of the Bank for International Settlements for April 2010. Both are woefully inadequate. The London Stock Exchange has not been providing numbers to the FESE since 2008, and so their figures weren't even in there - funny that, fancy the City of London not providing the numbers?? Surely, they couldn't possibly be trying to keep the scale of transactions quiet?
Secondly, the BIS figures only covers Foreign Exchange Transaction ans OTC Derivatives. While enormous (4 trillion dollars A DAY of foreign exchange), they are by no means a true measure of transactions.

I took the numbers from the standard BIS tables, which only covers 7 of the EU countries (UK, France, Germany, Italy, Netherlands, Belgium and Sweden). The numbers there are eye watering. I estimate that for the UK, we are currently at well over 1000 trillion pounds a year (Note to moderator, please do not remove my comment because I linked to my own blog - to the best of my knowledge, it is literally the only place where anyone gives these numbers - yes, my 25 comments are still missing)

The total transactions for the 5 Eurozone countries for 2010 comes to 1572 trillion euros. How can a 0.1% FTT applied to all this, and applied across the entire EU only generate 47 billion? I suspect that the EU economists are trying to downsize the level of transactions so as not to scare off the markets.
But anyway, if the UK followed Europe in applying the 0.1%, it would generate somthing like 1 trillion pounds per year. That's enough to abolish all other forms of taxation within the UK - income tax, corporation tax, stamp duty, VAT, national insurance contributions etc. You would have to be stark staring bonkers to turn down such an opportunity.

With no corporation tax, the multinationals based in the UK would be able to repatriate the trillions they have stashed away in tax havens like the Cayman islands. That way, the economy would gain an immediate boost for free.

By the way, if I was making the rules I would say that any repartriation of money from taxhavens should be zero rated, whereas sending money to the Caymans should be clobbered with a ten times higher FTT. That would get the money back into the real economy.
I defy anyone to explain why we have to continue with Osborne and Cameron's plan A of massive austerity when the solution is right in front of the Chancellor's nose. Even the Conservatives pay masters in the City must surely accept that this is 100% rational.

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