25 Nov 2012

Australia : An FTT of 0.24% could replace all existing taxes

When the latest set of BIS figures came out, I commented that the numbers for financial transactions for Australia were way off because of the absence of numbers for many of the key players in the Australian Financial Sector. If you download the 575 page report you will find that many of the figures that should be in table 18 (on page 18), table 21 (page 20) and table 26 (page 22) are "nav"  (not available). Very frustrating.

But I've just discovered that the AFMA (Australian Financial Markets Association) produces a very nice report that you can download as a pdf file. It includes the following summary of annual turnover in the Australian Financial Markets.
You can see that for 2011-12, financial transactions were just over 125 trillion Australian Dollars (AUD). Additional tables show that nearly all the bulk of this is due to two main areas: 80 trillion is due to what is referred to as "Debt Markets" and a further 40.8 trillion to "Currency Markets".

In the following table, I have taken the AFMA data, together with the BIS data on "Payment instruments and Terminals by non-banks" (page 8 of the report) to get a value for Total Transactions. I then compare that with the numbers provided by the Australian Bureau of Statistics for the Total Government Revenue from taxation. These include both Government taxes, state and territory taxes, and local goverenment taxes. I then calculate the level of FTT that would be needed to completely eliminate all the existing taxes.

As you can see, the resulting number for 2010 (the tax figures for 2011 are not yet available) is 0.24% - a number that is very similar to many other countries. It's certainly higher than the values obtained for countries like the UK and the USA where the scale of financial transactions has become quite ridiculous. But it shows that the general idea of using an automatic, painless and fair taxation method based on taxing all financial transactions is a perfectly viable option. Perhaps the Aussies could be the first to give the idea a go?

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