18 Oct 2015

Australian Financial Transactions - the true picture. And how to get rid of nearly all taxes with a simple Financial Transaction Tax

Last week I compiled figures from the Bank for International Settlements for Financial Transactions which supposedly provide a reasonably complete view of financial activity in 23 countries. According to BIS, the total for Australia was just over 69 trillion Australian Dollars (AUD).

Well, it turns out that the true number is virtually twice that. The Australian Financial Markets Report (AFMR) provides a much more detailed analysis than BIS, and you can find all the details on their site. You can download the info as a detailed 68 page report as a pdf file, or as an excel sheet.

Here are the main numbers.

For 2014-2015, the total was AUD 135.2 trillion - up 7.2% on the previous year, and 95% larger than the number provided by BIS.  But, looking at the two sets of data, I can see little sign of a real overlap. BIS provides numbers for credit transfers, direct debits, card payments and cheques that don't get mentioned in the AFMR. One number that BIS mentions that could overlap is the figure for RITS (the Reserve Bank Information and Transfer System), but there is no obvious corrsesponding figure. Likewise,  BIS gives a 10 trillion dollar figure for Austraclear, but again there is no easy correspondance.

As I consequence I propose to put everything in the same table, where you can see all the numbers.

So, while I may be double counting some numbers, I would like to suggest that maybe the total figure of over 204 trillion dollars may actually be quite realistic.

Can I also congraulate the Australians for producing such a comprehensive report.  In it, you can get a wealth of details about the breakdown of where financial trading occurs. And in the pdf file, they  also include reports about the role of particular players. For example, you can learn that one of my favourite companies - LCH.Clearnet Ltd - whose figures have been largely "nav" for years in the BIS data set is big in Australia. I quote:
"SwapClear continues to lead the cleared market in interest rate swaps (IRSs) denominated in Asia-Pacific currencies and clears over 80% of the cleared market in AUD IRSs. Of the entire AUD interest rate derivative (IRD) market (i.e. cleared and non-cleared),SwapClear clears 65% of this total".
I dream of a day when every country is obliged to be as thorough as the Australians in providing full details of what goes on. And of course, do I need to stress the fact that I pointed out last year, that Australian Financial Transactions dwarf total revenue from Taxation? Here are the official numbers from the Australian Bureau of Statistics :

Note that the figures are in millions of dollars, not billions as for the transaction data.  A simple calculation shows that the Australian government could replace their entire tax system with a universal transaction tax of 0.21%.  And the following table shows what would be needed to replace each of the main sources of tax revenue by a simple and painless automatic transaction tax on all transactions, assuming that my figure of over $204 trillion is realisitic.
Would Australian citizens vote for a government that promised to abolish all Income tax by replacing it with a 0.12% tax on transactions? Or replacing Taxes on provision of goods and services (sales taxes) by a 0.05% FTT? Or replacing property taxes with a 0.02% FTT? Or scrapping employer payroll taxes with a 0.01% FTT?

Unless they are insane, surely they would have to vote for this.

Go for it Australia! (and thanks to my friend Susy in Australia for her support over the years).

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