tag:blogger.com,1999:blog-7530776363222965313.post9135830295310774787..comments2023-10-07T13:16:34.756+02:00Comments on Simon Thorpe's Ideas on the Economy: Time to push for Plan BSimon Thorpehttp://www.blogger.com/profile/02605233720415886802noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-7530776363222965313.post-84396261796788541372012-02-20T20:20:22.979+01:002012-02-20T20:20:22.979+01:00Whether the costs are passed on or not depends ent...Whether the costs are passed on or not depends entirely on the sensitivities of the buyers and sellers to changes in the price. As it happens, the price for a significant volume of foreign exchange trades is zero, which is why the volumes are so high. <br /><br />Secondly it's a misconception to assume that taxes are paid by the entities on which they are levied - for example corporate taxes. It's appealing to vote for corporate taxes because none of us are corporates therefore it doesn't cost us anything to mandate a higher levy on corporates. Except that the corporates have customers, staff and owners who actually bear the burden of the higher taxes. Since the corporates are wholly owned by people, those taxes hit real people - the owners, the staff or their customers depending on the balance of power. <br /><br />The negative effect of a specific tax - selectively aimed at one group - is that it inhibits an activity which benefits the participants. One argument in favour of general taxes such as VAT is that it hits all activities equally, is less avoidable, and therefore distorts behaviour less. Unlike your FTT..The volume traders are banks - who do it because their customers are doing it - and their big customers are investment institutions - ultimately people's savings - pensions, funds and the like. And that is where the taxes will wind up, because these entities have less choice about whether or not they trade, therefore they will pay to trade. And if you are responsible for your pension or investments, the cost will come back to you. There isn't a fairy godmother who's going to pay this tax. Secondly 'assume that the Forex traders are not put off' is heroic. A great proportion of the volume is trading to and fro rather than end-users - double-counting and between market-makers. History is that volumes have risen hugely as spreads have dropped. Spreads were 12/10,000 over twenty years ago but volumes were small - now they are 0 to 1 or 2/10,000. You are proposing a tax of 10/10,000 i.e. a spread of 20/10,000. The FTT is set at maybe twenty times the price in the market. Not many people will pay 20 times the value of their activity in tax. So in a way you're right that you won't be paying it - nobody will because trading volumes will collapse along with your projected revenues. A better understanding of what the volume numbers mean might prevent such suggestions being bandied about in the public domain. And a basic sanity test of 'is it reasonable to suppose that 50% of the UK's GDP can be paid in tax by a sector whose output represents around 9% of GDP' (2008, Bank of England, probably a high-water mark) should dispel any doubts.You suggest raising the tax rate to compensate for falling yield - but the sums you need to generate cannot be raised from such a narrowly-focussed tax; the money isn't there and avoidance is easy - just stop trading financial instruments. The upshot will be that your FTT will raise some revenue by indirect means from a similar group of people who pay taxes anyway. Simon Thorpehttps://www.blogger.com/profile/02605233720415886802noreply@blogger.comtag:blogger.com,1999:blog-7530776363222965313.post-26755470955714075022012-02-20T18:15:59.117+01:002012-02-20T18:15:59.117+01:00Jrussell88
I can't follow your argument to sa...Jrussell88<br /><br />I can't follow your argument to say that the costs will always be passed on. Let's take the $4.8 trillion a day in foreign exchange handled by CLS Bank see http://simonthorpesideas.blogspot.com/2012/01/cls-48-trillion-day-in-2011.html . And let's tax that at 0.1% and assume that the Forex traders are not put off (for the sake of argument). That's $4.8 billion a day of revenue for te government - about $1200 billion in a year.... enough to abolish all the other taxes. Now, you say that the Forex traders will be able to pass on the taxes to the rest of us. But how? I don't buy anything from Forex traders! How can they get me to pay anything?<br /><br />Of course, realisticly, the Forex traders will probably calm down and the revenues will drop. But I'm happy to have the FTT rate go up to compensate.<br /><br />As to the question of whether I'm feeling lucky I would say that it's really not a question of luck. It's a simple rational choice to prefer one way of getting tax revenue (via an automatic, painless method that has no loopholes and no way of cheating) to another (based on Income Tax, Corporation tax, VAT etc that are all hopelessly flawed). Have you looked at http://www.thetransactiontax.org/ site? Pretty convincing I think...<br /><br />SimonSimon Thorpehttps://www.blogger.com/profile/02605233720415886802noreply@blogger.comtag:blogger.com,1999:blog-7530776363222965313.post-82444410488859947192012-02-20T16:28:15.038+01:002012-02-20T16:28:15.038+01:00Well I guess the Guardian might just publish this....Well I guess the Guardian might just publish this. It's got to be a good indication of a lame idea that only the politicians are in favour of it.<br /><br />The flaw in your proposal is that you assume everything stays the same after you impose this tax... I wonder how confident you - and all the other proponents of such a tax - would be if every other tax were removed - Vat, corporate tax, income tax, national insurance, capital gains, stamp duty, rates and all their exemptions and allowances, and replaced with the FTT you propose?<br /><br />UK government expenditure is running around 48% of GDP, of which 10%+ is borrowed, so a 2% tax won't have much impact. As to who's actually paying - well mostly it's you and me. The costs of your FTT will be passed on to the same consumers, who are paying the existing taxes. Surprise! - there are no free lunches.<br /><br />If you're right, it's a no-brainer. If you're wrong then the government's funding will disappear in a puff of smoke, along with a huge volume of transactions and presumably the associated activities and employment? Do you feel lucky?Simon Thorpehttps://www.blogger.com/profile/02605233720415886802noreply@blogger.comtag:blogger.com,1999:blog-7530776363222965313.post-54819569362939565682011-11-03T16:35:13.889+01:002011-11-03T16:35:13.889+01:00So would this 0.5% FTT tax on UK foreign exchange ...So would this 0.5% FTT tax on UK foreign exchange be calculated as 0.5% of roughly $1,854 billion per day? I guess it is more likely you are suggesting 0.5% of the brokerage pips made upon entry and exit of each FX trade, right?ExpressPropertyhttps://www.blogger.com/profile/03193673798172662225noreply@blogger.com