11 Mar 2012

Updated figures for an FTT in the 23 BIS countries

A few weeks ago, I compiled the numbers for transactions in the 23 BIS countries, and generated some numbers on the FTT rates needed to replace the existing tax system. Unfortunately, the World Bank didn't have the numbers for government revenue for all countries, and so there were some serious gaps.

However, I've managed to compile some figures for 2010 using GDP and revenue numbers for 2011 from the CIA data base. I've also used my updated figures for the UK, based on the £1760 trillion figure that I am currently using (i.e. $2,200 trillion). Here are the results.

The most impressive figures are the USA, the UK and Belgium, where the FTT rates needed to abolish the current tax system are respectively 0.077%, 0.042% and 0.048%. Clearly, these numbers assume that transactions continue at the current levels, and of course, I will be told that any financial transaction tax will immediately cause a collapse in transactions. But what would be the drop caused by a 0.042% tax?? Frankly, no-one has the foggiest clue. I don't think the economists' models are good enough to predict the effect with any degree of certainty. The only real way to find out the effect would be to do it.

Of course, the trick would be to not simply add a 0.05% FTT (as proposed by various groups, including the Robin Hood Tax people, and Europeans for Financial Reform), but to simultaneously scrap the other, very inefficient taxes.  The boost to the economy for any country prepared to be bold enough to throw out the existing taxes would (in my humble opinion) be enormous.

The table throws up some other interesting info. Only three countries would need an FTT of over 1% - Turkey, Russia and India - perhaps because they are countries where a lot of transactions are done in cash? But, overall, for the 23 countries, the average FTT level needed to scrap the existing tax system is just 0.168%. 

Anyone out there listening?


  1. I think nobody will take the risk to scrap all avenues of revenue and bet on the FTT. 
    But what they could do, put all the infrastructure in place as if it was the real thing, i.e. for bank transactions, stocks, in *all* areas. Then they can start playing with the rates. My guess is it would happen more tentatively. They should look how far they can push each area so as to maximise tax revenue. If they can really match current tax income or better current state spending(!), then they can scrap the other taxes. And these could even be scrapped by and by as you go along, making sure they are covered. You also would have to consider normal fluctuations in transaction volumes.One very attractive aspect of the TT is that you would reduce administrative efforts immensely. Just imagine a life without tax returns. 

    The flat rate version is then a further optimisation/simplification, if it is warranted by revenue. 

  2. Hi Christian,

    It would indeed be bold to remove all the taxes simultaneously. The problem with adding an FTT without removing other taxes is that the financial lobby will claim that it is just another tax, and they will be able to torpedo it.

    You could start by deciding to use the FTT to replace one tax at a time. The easiest would be to replace the EU contributions by a variable rate FTT in each country.

    You could also decide to abolish corporation tax first (to appease the financial sector). But, that would cause problems because people would claim that it is biased (and right wing).

    No, for me, the best solution is still to do the introduction across all taxes together. But, I'm listening to the arguments


  3. The EU contribution is probably the best starting point, I agree.

    But scrapping the corporation tax in the whole of Europe would increase outside investment like crazy. Maybe that alone would compensate if the FTT falls a bit short. Unfortunately, apart from the question whether it will work, there will be a lot of resistance from those people whose only justification of existence is the tax system - accountants, tax advisers, etc. They will immediately declare the end of the world, and politicians will be too scared to ignore them. In reality it would be only the end of *their* world. For a small business it would be heaven. 20% more of revenue to reinvest, no tax return. Business would just explode. It could be a new spring for rusty old Europe, if it can get over itself.Unfortunately it is at the moment very preoccupied with keeping the status quo (read banks) alive. But at least the TT has become a topic. 

  4. One aspect I notice in your table:
    The more advanced an economy, the more the FTT seems to work. But these are exactly the ones with over complex administrative systems. So they also might have the biggest difficulties jumping over their shadows, with all the vested interest around in the status quo.

  5. Hi Christian

    I guess that one reason why applying an FTT looks more efficient in  advanced economies is that more of the transactions are electronic. Clearly, if a lot of the economy involves cash, then an FTT is going to be less efficient. It's also highly likely that there is a lot of tax evasion going on - people declaring that they don't earn as much as they do, companies claiming that they don't have turnover, sales taxes not being paid etc.

    Even in developing countries, switching to electronic transactions that can be taxed automatically and painlessly would be a great idea for them too.

  6. Oh, they're listening all right.

    And hiding in the woodwork for as long as they can.

    What is sorely lacking in the equation is proper statesmen who have the balls to implement it and not the petty politicians there are now who quiver at the thought of bankers ruining their comfortable existence.

  7. Hi Michael,

    I would just love to find one politician who would be prepared to take up some of these ideas. There must surely be someone out there who isn't worried that Murdoch and co will spill the dirt all across the front pages if they dared to take on the financial sector?

    It seems obvious to me that anyone who did could get a real landslide in their favour.



  8. Hi Simon

    Just got a chance to catch up on some of your fantastic ideas yet again!!! Have seen also your YouTubes. Superbe genial!!!

    Haven't yet read the books that you suggested--but will do soon.

    Thanking you soo much for your amazing findings & delivering it all so superbly yet again!!!


  9. Hi Suzy..

    Wow... still going through my stuff from last november! Plenty to read and digest....
    As you are in Australia, it would be nice to know if there are people there who are pushing to prevent money creation by commerical banks and make it so that all money creation is done debt free by governments....

    Let me know if you find some fellow revolutionaries!