Who is funding your campaign? The Emir of Dubai, perhaps?

@1

Who is funding the opposition? The TPA, Policy Exchange, the IEA, the ASI, the CPS, and all the rest of the right and libertarian leaning shower – none will say who funds them.

One rule for the right …

An excellent summary analysis of the implications of the FTT from Clifford Chance here:
http://www.cliffordchance.com/content/dam/cliffordchance/PDF_2/Client_Briefing_The_Financial_Transaction_Tax.pdf

Couple of highlights:

6. What will happen to the existing stamp duties on securities in the UK and elsewhere?

It looks like they would be entirely replaced by the FTT (but stamp duties on land will be unaffected). The FTT rate has to be uniform across equities and other financial instruments, so Member States will probably not be able to maintain the existing (relatively high) stamp duty rates.

This is good news for individual investors who, whether investing directly or through pension funds or unit trusts, are likely to benefit from the much reduced rate compared to the 0.5% of stamp duty. It is similarly good news for private equity funds.

It is also, more surprisingly, good news for investors outside the EU (including those in tax havens), who currently often pay stamp duty when buying equities, but would be outside the scope of the FTT if they are buying from another non-EU person.

It is less good news for those Member States who currently have significant stamp duty revenues.

7. How much money would it raise?
The Commission paper estimates the tax itself would raise €16bn to €43bn, but the figure is very dependent upon the degree of dislocation, and previous reports suggest the Commission’s original estimate was €10bn. Revenues would be shared between Member States and the EU (partly reducing national contributions).

The Commission does not however estimate the reductions in receipts from other taxes. Stamp duty revenues are currently quite significant – £4bn in the UK alone. Add to this reduced corporation and personal tax receipts – the Commission’s impact assessment anticipates a reduction in economic output of almost 1.8% – and it seems likely the revenue effect of the FTT will be negative.

The FTT is therefore perhaps the first tax in history which is being proposed in the knowledge it will reduce tax revenues.

The only really good news is that the FTT requires unanimity among Member States to be adopted, and George Osborne has already indicated that he will veto it.

I’m not well up on this sort of stuff, but the fact that the unelected EU commission is pushing it so they have a revenue stream independent of interference by voters makes me think it has to be a stealth tax on us.

I can’t see how this tax can be paid by anyone except the man in the street. It might look as if the banks are being taxed, just as it looks like companies are taxed when they pay NI and company taxes. But since companies, including banks, still end up making the same percentage profit and still pay the same amounts to shareholders, then they must pass on taxes to customers – us. Or am I totally stupid?

And should an unelected body be collecting taxes from us without us being able to say how those taxes are spent? I certainly don’t fancy Barroso spending my money.

One more thing. You say banks threaten to leave the UK and this is blackmail. What happens if they do leave? It’s probably not that difficult as all transactions are electronic nowadays and can be done from anywhere. Hell, I’ve checked my bank account and paid bills from India. And since all this finance stuff apaprently contributes more to our economy than any other sector at present and the UK depend on banks more than any other EU country, can we take the risk they’ll leave and wreck our economy for what is a relatively small sum of money in the wider EU? Our competitors in the EU aren’t going to be bothered when the UK is wrecked.

Northern Worker puts it quite right. A tax may be sold as a tax on bankers, or similar targets for populist rhetoric, but the actual tax incidence will be something else. Something you will not like.

Afterwards, there will be reports complaining how someone twisted the things and it all went wrong.

Our competitors in the EU aren’t going to be bothered when the UK is wrecked.

For Paris and Frankfurt, that’s less a bug than a feature.

I’ve said this before but … it’s all very well talking about “blackmail” etc. (and I agree with that sentiment to a degree) but if you are introducing a tax to raise revenues, it should matter to you whether it does raise revenues. If revenues fall, and you think it is important that tax revenues rise (as I do, in the current situation) that’s bad. If you ask me, it is ignoring this that makes you look “out of touch”

You may need a subscription to see this, but here’s ICAP, the world’s biggest inter-broker dealer, saying it will certainly leave London if the tax is imposed:

http://www.ft.com/cms/s/0/86770a00-eab2-11e0-aeca-00144feab49a.html#axzz1ZjXIg96s

imho, it’s not easy to call that bluff. They tried it is Sweden:

http://www.piie.com/realtime/?p=2433

Worstall is bound to pop up here and say two things, which despite who is saying them, ought not be ignored.

1. The FTT will not be applied to foreign exchange transactions, because of EU law
2. Some European Union report or other actually predicts the FTT will cause tax revenues to fall.

If you ask me, the debate about the Robin Hood tax is only being won if you are going la la la I’m not listening to the arguments against it.

fwiw, I have been mildly supportive of this tax. I don’t think it’s a tax on bankers (if you think that this tax will see tax revenues go up by £Xbn and banker’s pay go down by £Xbn, you are a fool) and I don’t think it will make the financial system safer, but I did think it might be a perfectly sensible way to raise more tax revenues, which I think we need to do. Now I am not sure.

[actually, because it will destroy the overnight lending market (at least, that's what Tim argues and I thought it made sense) it will stop banks relying on short-term financing so much, which might make the system a bit safer]

6 – Kenneth Rogoff agrees:

Worse still, over the long run, the tax burden would shift. Higher transactions taxes increase the cost of capital, ultimately lowering investment. With a lower capital stock, output would trend downward, reducing government revenues and substantially offsetting the direct gain from the tax. In the long run,, wages would fall, and ordinary workers would end up bearing a significant share of the cost.

http://www.project-syndicate.org/commentary/rogoff85/English

But do they care who bears the burden?

The impression I get from the OP is that it’s about perception, the message*, not what will actually happen. Is that unkind / unfair of me?

(* “we’re Doing Something about the bankers”)

I wish this whole “incidence” debate would go away. It would go away if the bloody Robin Hood campaigners dropped the bloody tax on bankers bullshit. All taxes have incidence. We need to raise tax revenues, that means we need to choose a tax, incidence and all. Imposing a tax upon bank shareholders, bank employees and bank customers (i.e. all of us) is a perfectly acceptable set of people to hit for taxes.

[If I believed Rogoff that this tax would cause the level of capital investment to fall, I might be more worried, but I don't really think a small change in the cost of capital is going to make much difference, especially when compared to the impact upon investment of alternative taxes. I can't justify this belief with anything other than a general skepticism about the responsiveness of investment to small changes in, effectively, interest rates]

@ 11

Why does the unelected and unaccountable EU commission need to raise tax directly from us?

I’m not a banker but I am getting fed up with all this banker bashing. Quite simply it’s getting in the way of understanding the real problem – idiot politicians borrowing loads of money so we can be blessed with five-a-day coordinators. Then, again, the bankers are equally stupid for lending money to politicians. What possessed bankers to keep lending money to Greece until quite recently when it was obvious that Greece had no hope of paying it back? And Greece isn’t the only one rolling over its credit card. What a mess!

“Quite simply it’s getting in the way of understanding the real problem – idiot politicians borrowing loads of money so we can be blessed with five-a-day coordinators”

Why do you think this is “the real problem”? I ask because politicians borrowed a total of zero pounds and zero pence to spend on five-a-day coordinators.

@ 13:

“Why do you think this is “the real problem”?”

Probably the fact that the previous two administrations borrowed significantly to fund day-to-day running of government on the (evidently ridiculous) grounds that they had “abolished boom and bust”, necessitating heavy cuts to government expenditure now that the bust has, in fact, come along.

So far I’ve taken a stance of being just about against the FTT, however whenever I have asked people who champion it to go in to detail they do not. They repeat the top line details, and fail to explain how they aren’t a danger to the economy, and how the cost wouldn’t be passed on to the customers anyway.

And now we are hearing that in all likelihood such a change would decrease tax revenues in the UK due to it replacing Stamp Duty.

All round the “Robin Hood Tax” guys have done a fantastic campaign, the positioning, the opportunism, the name…it’s really managed to convince people that it is something that it is not. I do congratulate them on doing a good job, it’s just a shame that the outcome is one that could really hurt us thanks to such deception.

“Probably the fact that the previous two administrations borrowed significantly to fund day-to-day running of government on the (evidently ridiculous) grounds that they had “abolished boom and bust”, necessitating heavy cuts to government expenditure now that the bust has, in fact, come along.”

Northern Worker referred to five a day coordinators, on which government spent not one single penny. So how were they the “real problem” instead of the bankers?

I’ve been trying to get Owen Tudor to think about the incidence of this tax ever since the TUC first leapt on the bandwagon.

I just find it so darn surprising that he refuses to engage on the topic. So, so, darn surprising.

@ 16:

Did the government spend money on people with the job title “five-a-day co-ordinators”? No. Did the government run up significant budget deficits to increase the size of the public sector? Yes. Is this the problem, not evil bankers? Yes.

XXX there is room in this world for irresponsible/bad politicians and irresponsible/bad bankers

A bad policy stemming from a toxic combination of a misunderstanding of the causes of the credit crisis (where’s the tax on property, or curbs on flooding the market with cheap credit), plus a hefty, nay massive, bit of class war (trade unions vs bankers couldn’t be much clearer labour vs. capital).

But I guess it makes some people feel better.

@ 19:

I didn’t mean to imply that I thought it was an either/or situation, and that, if the government is at fault, the banking system can’t be. I think that they’re both at fault, but the government more so, both for setting up bad regulations which allowed banks to carry on with unsafe practices (and then later insulating them from the effects of their actions), and for running up a large budget deficit in the middle of the boom. So the government is “the real problem” in the sense of being the more serious problem, rather than the sense of being the only one.

Debate? You cant even answer questions based on simple economics owen, you could”t debate your way out of an open door.

“Did the government spend money on people with the job title “five-a-day co-ordinators”? No. Did the government run up significant budget deficits to increase the size of the public sector? Yes. Is this the problem, not evil bankers? Yes.”

But it would have made only the most minimal difference if the UK government had – like the Spanish government – run a surplus in 2006. The deficits post 2007 owe more to collapsing tax revenues than to big increases in public spending (which did highlight the unhealthy reliance on tax from the City and financial sector).

Some money was (and is) wasted by government, and I think they should have raised more revenue from a wider range of sources to pay for public spending. But the idea that this was a bigger problem than what the bankers got up to is another right wing talking point like the ones about the five a day coordinators or the cat-owning immigrants.

Don

good point. Maybe some exceptions (Greece?) but as a rule spot on.

@3 – No, you just have a two-rate system. One for where the FTT is at both ends, and one where it isn’t. The Eurozone go ahead, and the UK gets hammered when brokers move to EU cities. PLAN!

As other countries add their own FTT laws, the get incorporated into the lower rate zone, and most of the commonwealth have indicated they will also do it. Oops, there goes another chunk of our financial people…

@13 – And when that “five-a-day coordinator” helped support healing eating and saved the NHS £100 in bills for every pound spent on him? Oh right, typical Tory – value of nothing, cost of everything.

healing? healthy. lol

It cannot be said too often that the attempt by Tory ideologues to place the blame for the crisis on the previous Labour government (notwithstanding the fact that their economic policy was crap) and now the Eurozone is complete bo!!ocks, considering that their policy in opposition differed only marginally from that of the government, and continues in the same vein today.

I mean blaming Labour for “setting up bad regulations which allowed banks to carry on with unsafe practices”. Do I see any better regulation today?

@26

Leon, my point, perhaps rather glibly put, is that governments of all colours spend our money without any regard. More than that, they spend too much of it.

There are so many instances of waste I don’t know where to start. How about 999 centres, NHS computers, huge armies of people inventing and enforcing red tape, sending money to dictators so they buy new Mercs? And yes, there were (are?) local authorities which employ five-a-day coordinators out of our taxes. Indeed when a school governor I met some of these righteous and unnecessary people. You want to save money on the NHS? How about sacking some of the managers given there is now more admin than frontline staff? As for taxes, we pay too much and I simply don’t understand why politicians need to find more ways to tax us when we already have the longest and most complex tax code in the world.

All of that aside, the point of this piece and discussion is whether the EU should levy FTT and take the money itself. I say ‘no’ because a) they are an unelected dictatorship, b) we’ll end up paying the tax, not the banks and c) there is a chance that such a tax will wreck an important part of our economy. On the last point, if we go ahead with an FTT and the financial sector ups sticks and leaves, it will be too late to say “well, sorry, but we didn’t think they’d go – you’ll all just have to take up the slack and pay more tax”.

It people’s lives we’re taking about here. It’s our children and grand children who will reap the whirlwind and have to pay.

By the way, I used to vote Labour until Brown. Now I can’t see anyone I trust – they all seem to be the same.

@29 – Good luck with the MPD treatment.

And if the EU is unelected, then Government is an autocracy, by the same standards. IF there’s a FTT and the zone is set up as the Eurozone counties have indicated, what’s for *certain* is that the financial sector in the UK will shrink dramatically.

You want to wreck the economy FURTHER just because it’s important to you that we don’t do something sensible because it’s been suggested by people not British nationals.

And you went from centralist to supporting national socialists implementing social cleansing and crushing the British economy. Well done.

This whole thing is nothing more than a power grab by the EU, and.a way for them to try and shift blame from their own many mistakes to others.even the EC report on the subject shows that an FTT will reduve net tax revenues and reduce GDP.

What really matters to the unelected EU beaurocracy is WHO collects the taxes though. If they are holding more of the share of revenues then they have more control, more power and elected governments are more beholden to them to get their subsequent share of the pie.

I work in a bank, and such a tax would affect us. However, we would pass the costs down to our cuistomers. It would be pension funds and corporate clients who suffer the most. Even a 0.01% tax (1bp) when compounded would end up being significantly more – we estimate from 25bp to over 1% depending on the type and duration of the product.

Markets would also become much more volatile as speads would be forced wider. It would also make banl funding hugely more costly, and would probably cause more, not less banks to fail in times of stress.

Basle 3 rules are already causing banks to look for more and longer term funding and limiting the speculative nature of many of their bisinesses (as you have to hold a lot more capital against these trades, which is a cost). An FTT really isn’t necessary to stop speculation.

Let’s be clear; the credit crisis started in banks thanks to too much credit exposure to poor quality mortgages. This crisis made people have a look at all forms of credit though, and government debt was next in the spotlight. The same stoey is there – too much government spening, too much debt and overlong credit extension.

Banks are in the spotlight in this crisis rather unfairly – as the EUs whipping boy. Pension funds sold their poor quality government debt, leaving banks the main holders of such rubbish, not least thanks to the agreements they have with governments as market makers and because of their own capital requirements.

Short selling was never an issie, just a scape goat, and when short selling bans came into efffect and failed, the powers that be started flailing around for another scapegoat. It’s banker bashiing again, this time with a few useful idiots and a power grab thrown in.

What really amuses me though is this;

The TUC et al are campain

Sorry clicked submit by accident.

As I was saying;

What really amuses my is that the TUC are busy campaigning and striking about ANY cuts in government spending.

Yet, at the same time they are pushing for a cut which will cost people money, push.a lot of financial companies out of the UK along with their high tax paying staff, and as the EC report states, reduce GDP and tax revenues.

They are busy saying we near more debt to grow our way out of the deficit, yet they are going to charge people more to hold that debt AND reduce GDP in one fell swoop.

Who, might I ask, is going to pay for public services if the tax base, not least from finacial services, is massively reduced, and the (much lower) revenues are held and controlled by the EU, who use it to. Try and bandage the Euro together.

On my mind, there is a certain gap in the logic.

@ 30

Quite a leap from what I wrote, I thought very plainly.

You’re probably right that we have an autocracy here in the UK. But the EU commission is not elected by us.

Why would the UK financial sector shrink if the eurozone has an FTT? I read somewhere that Sweden imposed an FTT a couple of decades ago and all the business left for London. If it costs you money to trade in Paris because of the FTT and there is no FTT here, then we will get their business. I thought I made myself totally clear that I wouldn’t want the EU taxing us directly. I would vote to leave the EU in a heartbeat.

Finally you said: *And you went from centralist to supporting national socialists implementing social cleansing and crushing the British economy. Well done.* What?
How did you arrive at that conclusion? If anything I’m a Labour supporter in the ilk of John Smith.

Anyhoo, what do I know I’m just an engineer working in mucky industry.

@33 – The EU commission has representatives from our country.

And the EU parliament, which is most definitely directly elected, is now co-equal with the Commission.

Sweden as a single country imposed a FTT, right. This is entirely different to the Eurozone and dozens of other countries imposing a FTT. One which benefits countries inside it with a lower rate, and cross- border trades with a higher one.

Given our major trading partners are all interested in implementing a FTT, and hence being “inside” the zone…

And John Smith was a left winger, revisionism from the right again! (Don’t want to be called right wing? Don’t act like one)

http://www.fx-mm.com/8910/blog/new-barriers-to-hedging/

“Northern Worker referred to five a day coordinators, on which government spent not one single penny.”

Don,

Who has been paying for them? If it’s a tier of regional or local government, wouldn’t most of the money have come via the national government anyway?

But it would have made only the most minimal difference if the UK government had – like the Spanish government – run a surplus in 2006. The deficits post 2007 owe more to collapsing tax revenues than to big increases in public spending (which did highlight the unhealthy reliance on tax from the City and financial sector).

Revenues decreased and public spending increased. Can’t see a problem there….