Transactions and Revenue in the Eurozone

I've been pretty scathing about the ECB of late - and in particular about Mario Draghi. But now that I've discovered the wealth of statistical information that they have on their site, I'm feeling much more positive! I used to think that only the Bank for International Settlements (B.I.S.) kept tabs on financial transactions. But in the last couple of days (and thanks to a tip from a guy at B.I.S.) I've discovered a whole pile of interesting stuff you can get from the European Central Bank.

For example, on this page you can download Monthly statistics for payments processed by two major payment systems used  throughout  the Eurozone - TARGET and EURO1/STEP1. I took the files, and added up the numbers to get an idea of the level of transactions via the two systems over the last 10 years. Here are the results.

As you can see, the totals peaked in  2008, with over 756 trillion euros of payments. The figures for 2011 (which lack the numbers for December) suggest that the total is creeping up towards the €700 trillion mark again.

But the ECB does and even more impressive job when it provides the national breakdowns of these numbers for the TARGET system (though not for the EURO1 system). For example, you can inspect the individual numbers for each of the eurozone countries for 2009, 2010 and 2011.

On another page, you can find numbers for "Payment and terminal transactions involving non-MFIs" for 2010. There is even a breakdown according to whether the payments are "Credit Transfers", "Direct Debits", "Card payments", "E-money payments", "Cheques", and "Other payment instruments". Fantastic!

So, of course, I immediately downloaded the whole lot, and compiled a table in which I took the grand totals for the Payment and terminal transactions, together with the TARGET numbers, to estimate the total transactions for 2010. The following table compares these numbers with Total Government revenue in each of the 17 Eurozone countries.

And so, there you have it. Even if you only take the standard payment mechanims (cheques, credit cards etc) and Target (I don't even included EURO1, which doesn't have a country-based breakdown), you get a total of 711 trillion euros, a number that is way above Total Government Revenue from all the existing taxes! The final column shows that overall, you would be able to replace all those taxes with an FTT on this set of transactions of about 0.5% (if we add the EURO1 total of 52.4 trillion).  Even the countries with the lowest levels of transactions (e.g. Estonia) could manage with an FTT of 2.6%. but for many of the countries, the values are well below 1%. Would Estonians accept to swap a 2.6% FTT in exchange for the abolition of VAT, Income tax, taxes on company profits, and health and unemployment contributions? I think that they would, and they are the worst case.

Now remember that here I am not including any of the transactions related to securities, interest rate swaps, and derivatives - the things that NYSE Liffe does. If they are included, then the FTT rate would be way way lower. But the point of this analysis is that even across the Eurozone, in countries that don't indulge in the massive speculation seen in the UK, replacing taxes with a single FTT is really a viable option.

Thank you ECB! I think you have really helped me make my point.