There is a report on Bloomberg by Tax lawyer Maud Poncelet which shows how the implementation in France is incredibly complicated. There are many situations where the tax doesn't apply, making it a minefield. It sounds like a fantastic deal for anyone who earns their money by proposing ways to get round the tax.
Another problem is that there is a serious risk that the traders will relocate - despite attempts to come up with ways of forcing people trading in French shares outside the FTT zone. This risk is made particularly evident when you look a this table that I found in the CityUK's "International Key Facts" document.
As you can see, in a whole range of areas, financial activity in the two key Eurozone countries - France and Germany - is completely dwarfed by activity in the US and UK. For example, foreign exchange turnover is nearly 11 times higher and Interest rate swaps nearly 8 times higher. Moving transactions out of the Eurozone would be very simple.
There are already reports of how the introduction of the FTT is leading to a drop in activity in Italy and France. I have little doubt that we will see a repeat of the oft-repeated story about how the introduction of a tax in Sweden led to everyone moving their operations to London. But, frankly, I suspect that you would see this sort of phenonomenon irrespective of what tax level is used. The traders in the City are so opposed to any possiblity of having to pay to do their transactions that they would probably have a strong motivation to deliberately reduce activity in the FTT zone, simply to back up their claim that any sort of tax is incompatible with economic activity.
But I seriously believe that my latest propositions provide a real alternative. Rather than trying to devise complex schemes to try and force people outside the FTT zone to contribute, I think that the solution is for the European Central Bank to impose a flat rate Financial Transaction Tax on absolutely ALL Euro-denominated electronic transactions - No exceptions. The tax should be paid by everyone, wherever they are in the world. And that includes individual citizens like me who would see a small tax on their bank statements.
By doing it this way, you could completely block any incentive to disguise transactions by calling them something else, or to devise complex schemes to get round payments. I have no doubt that if you leave any potential loopholes, the multinationals will find a way to exploit them.
But suppose that we apply the tax to absolutely all Euro denominated transactions. What way round that could their be? Yes, you could potentially walk around with suitcases full of Euros. But frankly, that would be extremely risky, and not worth the effort to avoid paying 0.1% or whatever the rate is.
What is the next stage? Well, we really need some complete numbers on the volume of transactions that involve each different currency. In my youtube presentation, I showed the figures the indicate that roughly 20% of foreign exchange involves Euros. Given that the current volume is almost certainly getting on for $6 trillion a day ($1.5 quadrillion a year), this means that there is around $300 trillion in Euro trading that would be easy to tax.
Likewise, it would appear that around 40% of Interest Rate Swaps involve Euros, as you can see from this graph, conveniently provided by LCH.Clearnet on their SwapClear website.
Amazingly, LCH.Clearnet's website also provides updated data everyday about exactly how much they have handled, with a breakdown by each currency. In my presentation, I gave numbers for the 12th of April. Here's the chart for yesterday (16th April).
There you have it. $3.54 trillion in Interest Rate Swaps in a single day. $171.8 trillion since the start of the year. But the really interest thing is that they also tell us that preciely €1,195,492,098,262 of those were denominated in Euros - making a total for the year so far of over €69 trillion.
Now, let's see. If the ECB was to impose a 0.1% tax on all those Euro-denominated transactions, we are well on the way to reaping €250 billion a year. Very useful for getting the Eurozone out of debt. And that's just interest rate swaps. Imagine what the revenue would be if the other €2000 trillion of Eurozone transactions was taxed at the same rate.
It would be really useful if we could compile numbers not only for the levels of financial transactions in different countries (something that can be done with the numbers from the BIS report, and from the ECB for countries in Europe), but also for the value of transactions in each different currency.
If anyone has any ideas how to get hold of such numbers, please let me know.
No comments:
Post a Comment