“The EC impact assessment projects up to a 90% decline in derivatives trading”

I thought that was the point of it?

The idiot never shuts up and is to thick to realize the French are taking him for a political ride…….

If it only produces £1.28 billion why take a chance when we could simply chop the same amount of International AID not risk anyone `s job , growth or the structural decline of City of London ?

Hi Owen,

Thanks for taking the time to reply to our paper. I’ll try to respond to some of your criticisms here:

“This is dishonest: the EC impact assessment suggests a 0.5% to 1.76% impact over 20 years, so the figure quoted by ASI is the worst case scenario (and CUPE economist Toby Sanger has explained why we – and the EC themselves in all probability – don’t actually accept these figures, which are based on a ’Dynamic Stochastic General Equilibrium’ model. which assumes that all markets clear, there is no unemployment and a host of other highly unrealistic assumptions).”

As you say, the DSGE model is unrealistic. We stress this repeatedly in the report and emphasise the fact that this is a ball-park figure. However, it is right to take the worse end of the scale – as you admit, the model’s assumptions are all optimistic ones with regard to employment, growth, etc. It’s possible that the coming years are going to be a lot better than we think, but I think the potential for things to be a lot worse is greater.

“Some derivatives trading, some hedging, is useful. But the vast majority, the algorithm-driven High Frequency Trading which now accounts for 56% of trading in the US and 38% of trading in Europe is just gambling.”

Even if High-Frequency Trading is socially useless (it isn’t, but I won’t try to convince you on this!), and an FTT would wipe it all out, you will still be wiping out all but ~10% of the rest of the socially useful derivatives trading market. An FTT will wipe out both the derivatives trades we like and the ones we don’t like.

“The ASI report is deeply confused here, or really dishonest. In a single paragraph, they go from stating that FTTs would increase volatility, to accepting that there is evidence both ways ”

It appears that you are the one who is confused – our report states that while the economic theory and empirical evidence is quite convincing that a transaction tax would raise volatility, academic modelling has been inconclusive. These are all different types of evidence and one being inconclusive does not invalidate the others.

“I would argue that the ASI are just wrong here, about how useful the information revealed by algorithm-driven, High Frequency Trading is. In fact, I would argue that it actually produces information that could be dangerously false, because what HFT does is actually to confirm prejudices, rather than reveal truths… HFT makes its own evidence, and shouts louder than the facts”

You must be a very rich man to be able to determine which market moves are prejudices and which are truths. Assuming you cannot do this, you’re back to the old problem – you can’t pick and choose which trades to allow. Indeed, some trades do take place on the back of “animal spirits”, but most are reflective of new real world information. It is in traders’ interests to sort the emotion-driven trades from the reality-driven ones.

“However, the full ASI report also implies that there will be massive job losses in the financial sector itself as a result of FTTs, citing the 1.6 million people who work in the sector in the UK. But the vast majority of that 1.6 million work as branch bank tellers, or insurance salespeople, not derivatives traders and speculators.”

It is misleading to suggest that we imply that most or many of these jobs will be at threat from an FTT; we do not. But the fact remains that, whether you like the financial sector or not, it is hugely important to many working families. The network value of the City would be threatened if most derivatives traders moved offshore; the agglomeration economies that currently exist in the City that keep traders there would be threatened. If even a small chunk of the financial sector moved to Singapore, the related employment hit would be very damaging to people a lot more vulnerable than City traders.

“But to sustain the argument, the ASI report makes one totally illogical argument. It dredges up again the Swedish case of a tax that was so easy to evade that people did just that, before arguing that the UK stamp duty proves nothing because of the sort of transactions it covered (pretty much the same ones as the Swedish tax, which apparently is conclusive proof!)”

Swedish traders did not “evade” the Swedish Tobin Tax, they avoided it by relocating to other financial centres (including London). And readers should note that stamp duty does *not* cover “pretty much the same ones as the Swedish tax” – crucially, derivatives were covered in the Swedish case but not under stamp duty. Also note that stamp duty is rather easy to avoid so its impact is quite small.

Anyway, thanks for taking the time to reply to our paper.

“This old chestnut no longer even convinces the Financial Times, who have argued that such threats should be faced down as the bullying hyperbole that they are (for a start, if they can migrate so easily, how come the opponents of FTTs claim they will be jobless?)”

I’m a bit new to this, but my view of the FT is that it’s a rather socialist unit these days, so I think using the word “even” is intellectually dishonest, no?

It may well be that the threat can be faced down, but aren’t you overlooking the contention that the jobs move rather than the people? The base of operations can clearly migrate easily (just computers and paperwork and stuff) and those London-based traders who don’t wish to work in Belgium or wherever are simply replaced by people who do? Thus losing jobs AND the fictional tax harvest (and bear in mind that when we talk about job losses we kinda mean the loss of the taxes and the spending power, so workers going to Belgium are still jobs and economic contributions”lost”)?

Forgive me if that’s not right – I had read the ASI article (and ones similar to it previously published there) and while some of your rebuttal arguments seem vaguely sensible, I still see negligible benefit for Britain in this proposal – do we honestly believe the sector will simply swallow it?

“and cost the UK economy £25.58 billion (or £1.28bn a year), ”

No, it’s a hit to GDP. It’s that GDP would be £25 billion lower each and every year.

“This is dishonest: the EC impact assessment suggests a 0.5% to 1.76% impact over 20 years,”

No, it doesn’t. It suggests that impact each and every year.

And here’s why it’s important. Around 50% of marginal changes in GDP end up in tax revenues. GDP goes up or down by £10 billion, tax revenues will go up or down by about £5 billion. Rule of thumb but good enough.

So a fall in GDP by 0.5 to 1.76% of GDP will reduce tax revenues by 0.25 to 0.9% of GDP.

But the RHT will only bring in 0.1% of GDP (by the EU’s own same calculations). So we don’t actually get any extra revenue. We lose revenue in fact. This is a new tax which will *reduce* total tax revenues.

Not exactly a good reason to have it, is it?

“are based on a ’Dynamic Stochastic General Equilibrium’ model. which assumes that all markets clear, there is no unemployment and a host of other highly unrealistic assumptions”

Lovely, OK. So, what will be the effect on economic growth of a tax which makes capital for companies more expensive? Do come back to us with the estimates of the models you’[ve used won’t you. I mean you have done some modelling, haven’t you? You are the people recommending this tax, so you must have actually modelled the effect, yes? So, what was the result?

“Some derivatives trading, some hedging, is useful. But the vast majority, the algorithm-driven High Frequency Trading which now accounts for 56% of trading in the US and 38% of trading in Europe is just gambling.”

Stunning ignorance. HFT is hardly used in options and futures. It’s almost entirely in stocks. Stocks are not derivatives, options and futures are. Jeez if this is the level of market knowledge being shown by the RHT folks no wonder it’s a complete balls up.

“And it wasn’t fatal then, so why would it be fatal now? ”

Why does it have to be fatal in order to be not good? 25% inflation wasn’t fatal either but that wouldn’t be an argument that it’s desirable to risk having it again, would it?

“I would argue that the ASI are just wrong here”

Given your revealed ignorance about HFT you don’t mind if we don’t just take your word for that one?

“Some of the ASI’s argument for this is the impact of FTTs on investment, although as argued above, what FTTs will actually tax is speculation, not investment,”

No, an FTT taxes investment too. Go back and read the IFS report on hte incidence of Stamp Duty. It makes capital more expensive for companies. Yes, this does indeed have an effect on the economy. That’s exactly where the EU’s 1.76% comes from. Measuring the effect on the economy of making capital more expensive for firms.

“It dredges up again the Swedish case of a tax that was so easy to evade that people did just that, before arguing that the UK stamp duty proves nothing because of the sort of trransactions it covered (pretty much the same ones as the Swedish tax, which apparently is conclusive proof!) ”

Gargling nonsense. The Swedish tax was on stocks, bonds and derivatives. The stamp duty is only on shares (and market makers don’t pay it). Thus the Swedish derivatives markets disappeared (or buggered off) and in the UK people just use derivatives (like contracts for difference) in order not to pay the stamp duty.

Owen, the more we go into the details of this tax the more your ignorance of the markets you’re trying to tax is shining through. Are you absolutely certain that you’re the right man to be leading this for the TUC?

Have you found out what tax incidence means yet by the way? Because you did promise me to come back and say where you thought the incidence of this tax would fall…..

Disclaimer: I’m at the ASI but had no part of this report and am here in a personal capacity.

1. Mr. Tudor keeps saying that the numbers cited are the “worst case scenario” as if it couldn’t be any worse than that. In Sweden, the results were 5 times worse than the projected worst case scenario. Only 3% of the projected revenues were collected and the FTT was a net loss to the Swedish treasury every year even though their worst case scenario didn’t allow for such an outcome. On September 16, 2011, Anders Borg, the Swedish Finance Minister, said: “We have substantial experience in Sweden…And from the Swedish perspective, we cannot foresee that we would introduce such a tax in our system again.” Anders Borg is more of an expert on this subject than Mr. Tudor will ever be.

2. The tax will not “free up” capital for investment simply because there is no shortage of investment capital. Banks and large corporations around the world are flush with investment capital. The problem is a lack of solid investment opportutnities.

3. US Treasury Department studies show that most of the tax falls on retail investors, not financial institutions. Lael Brainard, Treasury Department Undersecretary for International Affairs, recently said: “We’re very much in sync with Europe on their goal of ensuring that large financial institutions bear their fair share of the burden, but the US-proposed ‘responsibility fee’ would better deter the kind of risky behavior that led to the crisis as well as ensure that large financial institutions and not retail investors bear the burden.”

4. After studying the negative economic impact of transaction taxes, eleven of the G20 nations have said “no” to the FTT. These countries include: the US, Canada, Mexico, the UK, Australia, China, India, Russia, Saudi Arabia, Indonesia and South Korea. In addition, Argentina and Brazil said they will only support the FTT if it’s world-wide, including Switzerland, Hong Kong and Singapore, all of whom have said they will not introduce any new transaction fees or taxes into their financial system. Japan and Italy have expressed reservations and are unwilling to commit to the FTT at this time. Among the G20 members, only Germany, France, Turkey and South Africa unconditionally support of the FTT.

There is no clean line between investment and speculation. When a company issues new shares to fund investment, or bonds, they are bought by “speculators”. Investment is a speculative activity, about the unknown future.

The prices at which those shares and bonds, that fund investment, will be issued are related to prices in secondary market, also populated by speculators, and if trading in secondary markets is made less attractive, that makes the initial investments less attractive also (because you have to sell them in secondary markets).

That said, my gut instinct is that real world impact of the increase in the cost of capital resulting from an FTT is smaller than this report estimates, but my gut is not an economics prophet.

If we had a financial system in which investment managers made well-researched investments in the equity and debt of firms, that would still be “speculation”.

We have a financial system in which investors do other stuff – for example quantitative strategies that pay not attention to what firms are up to in the real world.

Perhaps when left wingers talk about “speculation” they really have in mind a sub-set of speculative activity, distinct from what we might think of as worthy speculative activity, such as providing funds for firms to use for investment.

[what is the difference between gambling on investments in the real economy and gambling on horses etc.? answer: on the horses your expected return in negative, on the stock market, positive. A lot of guff is written about the "casino economy" ignoring the fact that providing funds for real investment is both a gamble and a good thing. Not necessarily what we want banks doing too much of, but it's quite wrong to think we want to eliminate all the "casino" stuff. The people who put money into Amazon were making a bet]

All this financial and economics stuff is way beyond me. But my rule of thumb is that if the EU civil servants want it, the Germans want it and the French want it then the UK is being scr*wed. Besides, any new tax is a bad thing especially if it’s designed to save the planet, which of course it won’t because it’ll be spent on something else. One further non-financial and non-expert point, any tax always end up being paid by us – the plebs. You don’t believe for a heartbeat that the bankers will pay it, do you? Even if they stay here to pay it and don’t leave for China or Switzerland, which they will and pay tax there instead.

Oh, and when I hear Bill Nighy and Glenda Jackson (Parliament today) saying it’s a great idea, I know it’s not.

I’ll leave you all now to argue about finance and economic theaory.

luck evaryoen, i pretand i can’t spel so peopal will think im aufentic wen i spout far rite drival, i am vary clevar and fool everywan oveiously.

@7

2. The tax will not “free up” capital for investment simply because there is no shortage of investment capital. Banks and large corporations around the world are flush with investment capital. The problem is a lack of solid investment opportutnities skilled people to allocate that capital due to the state saving the inefficient rentier class from the consequences of their actions

FYP HTH HAND.

@8

There is no clean line between investment and speculation. When a company issues new shares to fund investment, or bonds, they are bought by “speculators”. Investment is a speculative activity, about the unknown future.

That you can’t tell the difference is akin to tories who say protesters going to starbucks renders their views null and void; when something becomes so pervasive that fewer and fewer can tell the difference …

As a hedge fund manager once told me; the difference between an investor and a speculator is that one sleeps well at night and the other, due to persistent anxiety, doesn’t.

You can engage in reductio ad absurdum and claim that leaving the house for work in the morning is speculative because you don’t know for certain that the place won’t have burnt down by the time you get there, but it’s thoroughly mendacious.

@3 – A typical 1%er distortion of the actual impact again. Oh, and because killing people isn’t moral, while damping speculation is a good idea.

Your preference is notable.

@10 – And when the Little Englanders oppose it, it deserves serious consideration.

@6 – So, would you support making rolling back HFT “mis-trades” illegal? Because expecting Humans to unravel things when your poorly-written bot makes a series of idiotic trades no sane Human would ever do, and you’re bailed out…

@13

Little Englander and proud of it. So presumably you aren’t and would prefer to give away all our sovereignty like Greece?

@13 – I’d prefer, and won’t, try and discuss policy matters with a Little Englander who will twist anything I say to suit his idealogical blinders.

The Tobin/Robin Hood tax would be, in practice, simultaneously too advanced and too minimal.

To be effective, the Tobin tax must be world-wide, or very close to world-wide. When workers’ internationalism is strong enough to force financiers and governments to their knees world-wide – as it would need to be to get a world Tobin tax – - then the strength must be used for more drastic measures than a 0.1% tax.

The Tobin tax is both too ‘minimal’ to be an ultimate goal and too ‘maximal’ to be a suitable immediate stepping stone to socialism.

If’ used for practical political agitation, the Tobin proposal is misleading, because it gives the impression that misery, poverty and cuts can be mended just by taking a little off the plates of the rich (just 0.1%) whereas, in fact, we will need to dispossess the wealthy much more drastically.

Stamp duty is a tax on documents not on transactions.

Stamp Duty Land Tax is, by comparison a transaction tax – indeed I understand that the initial proposal was to call it Land Transaction Tax.

In relation to Tobin’s theory; where is the evidence that SDLT had an ameliorating effect on the property price boom that we went through over the last 10 years? Is not the truth that the incidence of this tax and the fact that credit was historically and foolishly too cheap are two substantial reasons why this tax has had little impact? Other factors dominate. In addition it is interesting to note that SDLT is paid by the middle … And definitely legitamately avoided at the top!

The average margin on currency transactions is a fraction of the proposed tax … Hence the tax would force the market to become inherently inefficient … And so reduce both the effectiveness and sense of hedging (which I think is a good thing) … And would probably simply result in the market going somewhere else … Indeed the introduction of a withholding tax in the US sulted in the Euro-dollar market in London in the 70′s …

If this tax were a ‘good’ idea and was easy to introduce with little adverse impact, why oh why do you think that every Government in the world would not have introduced it already? I suspect that Treasuries around the world have looked at this and concluded that it would be neither efficient or effective.

“I am not one of those who argue that because the UK has a functioning FTT, that proves that FTTs are a good thing ”

Really? That is quite odd considering I have read every thing you have written on this issue and for a long time you quoted the UK as a shinning example and solid evidence that the financial transaction tax does and will work. I know the differences were explained to you and numerous people took the time to email you yet you never responded or changed your stance.

I guess not being able to answer the questions finally got to you because your no longer one of those guys! And you can no longer brush the negative impacts aside and tell us its for “the greater good” as its now more than clear ( as to us it always was ) there are no positives, there is no new revenue.

I long ago questioned your ability to be pushing for this tax based on your qualifications and experience and now all this time later your understanding of the markets has not improved at all and you struggle to dissect the facts of a basic report…

“If’ used for practical political agitation, the Tobin proposal is misleading, because it gives the impression that misery, poverty and cuts can be mended just by taking a little off the plates of the rich (just 0.1%) whereas, in fact, we will need to dispossess the wealthy much more drastically”

Really? Well that’s silly then, to think we actually went through an industrial revolution and all the hard work it involved when in fact all we had to do was tax the kings of all there gold and silver and that alone would have transformed our world.

No need to create no need to progress, just take…a dog is of higher mentality.

@18 – “there are no positives, there is no new revenue.”

Sure, you might not be able to buy three new cars a year, only two!

And “progress” means the number of workers who slave for you, I see. Upstairs-downstairs called…

From the tax Leon- it will “cost money” as opposed to “generate more money” meaning “there is no new revenue”

@20 – I’m aware of your propaganda, yes.

I don’t chose to believe it, but rather the papers I’ve read on it, and how it can be implemented on a broad base, using differential rates to get countries to join in.

We have a good way to definitively test the benefit and disadvantages of a FTT. Let Europe introduce one and let the UK not introduce a FTT and we have a case study in comparing the difference. Perfect solution.

The Europeans are in favour of a FTT because they are convinced that there is nothing fundamentally wrong with European Monetary Union. It is just those dastardly derivative traders to blame for their travails by pointing out that the emperor has no clothes.

The academic studies as opposed to people making stuff up find no link between HFT and volatility. However, markets are vulnerable to the disappearance of liquidity. Not sure why anyone would think that introducing a FTT between a transaction when the volume earns less per share than the tax would not increase volatility as the liquidity vanished.
http://www.ft.com/cms/s/0/38452490-da07-11e0-b199-00144feabdc0.html#axzz1cyCs6LeQ

The old meme about UK stamp duty is of course nonsense. Trading in size is done through ‘ contracts for difference ‘ specifically to avoid the tax. Only the poor mug punters through retail and their pensions are left to pay UK stamp duty. People change strategies to avoid tax should be a surprise to no one. Of course, if HFT is narrowing spreads and lowering transaction costs then they are recovering some of the losses that they incur when the fat cat fleeces them through stamp duty. The ordinary punter can’t not be worse off with the introduction of a FTT.

James Tobin proposed the tax to specifically discourage transactions, not as a source of revenue. Therefore, revenue raising claims can be easily dismissed as wishful thinking. Moreover, as transactions evaporate, volatility will definitely increase. Purchases will get lumpier as transactions are lumped together to net off and people will only trade in response to large price movements. Revenue raising will prove to be a fiction. The only sensible way to tax financial institutions is through taxing their profits.

@22 – “The only sensible way to tax financial institutions is through taxing their profits.”

Great, remind us…what rate of corporation tax have you called for?

I almost wish to see this and other measures taken by the EU. Can’t wait to have the pensions of all these so called do-gooders and unions destroyed.

Oh, a Little Englander pops up and shows they don’t understand pensions or unions. What a surprise!

Okay, who’s been posting links over on the Daily Mail again?

Any neutral observer reading the OP and the subsequent rebuttals above by Sam B, Tim W and Richard W above could only conclude that motivation for a FTT is entirely political and takes no account of the economic and financial consequences.

It is clearly a monumental own goal waiting to happen and, frankly, given the state of the game, we can’t afford to concede it.

@25 leon

But he’s right – an FTT would destroy the returns on pensions.Every time you pay into your pension, so every month, the money has to be invested. Likewise when you start drawing your pension it has to be released by selling investments.

Whilst a tiny tax might not sound like much, over a lifetime, including the compounding effect over that time would be a massive cost.

Anyway, why would we want a tax which would be primarily be paid by the UK but collected and dispersed by the EU. Do you think they’d give us our tax revenue back or use the money instead to prop up their pet projects elsewhere? I thought the unions wanted more tax revenues for public spending, not less.

“There is no clean line between investment and speculation. ”

No, but there is a difference between a short term investment, where you are buying the asset in the hope of making a capital gain (or shorting it) within a short period (sometimes a matter of minutes), and making a long term investment where you also want to recieve dividends/rate of return and don’t particularly care about daily fluctuations in price. I’d suggest the elasticities of demand are different for both types, and hence a tobin tax would effect different types of activities in different ways

It is of course open to interpretation as to where the cut off point for short term investment ends and long term investment begins.

“James Tobin proposed the tax to specifically discourage transactions”

Yes, thats what I thought the point of it was. In particular the idea to try and tame short term speculation. Which is why the discussion needs to focus on the advantages and disadavatnages of short term spec, and what the trade off is. Instead we are getting a predictable avalanche of “OMG!!! ECOMINC ILLITERATESS!!!1211″ from the usual suspects ignoring the fact the proposal comes from a nobel prize winner in economics

Also the hypocrisy is breathtaking. Its worth noting that VAT is a tax on transactions – pretty much most transactions in the economy -, and the current government increased it by 2 and half points without anything approaching the hysteria and scaremongering we have here. Perhaps that’s because it is a regressive tax and there is more than a hint of class war about the opposition to tobin.

“Its worth noting that VAT is a tax on transactions – pretty much most transactions in the economy -, and the current government increased it by 2 and half points without anything approaching the hysteria and scaremongering we have here. Perhaps that’s because it is a regressive tax and there is more than a hint of class war about the opposition to tobin.”

Technical point here. In the economic jargon VAT is not a transactions tax. Because it is not in fact charged on each transaction. It is, rather, a tax on final consumption.

To see the difference: a transactions tax of 1% say. OK, every transaction in the production chain pays 1%. We might have 1 transaction, we might have 100 transactions, to get whatever it is from the ground to hte final consumer. A transactions tax is thus, in this example, going to be 1% or 100% over the chain of transactions. Even more technically, such a tax is a transactions tax on intermediate inputs.

VAT however, is netted off. So it only ever comes to 20% of that final consumption price. This is a very different situation.

Which is why Diamond and Mirrlees (both Nobel Laureates) specifically warn that you don’t want to have transactions taxes on intermediate inputs if there’s some other way of achieving the same goal: a tax on final consumption for example, like VAT.

“In particular the idea to try and tame short term speculation. Which is why the discussion needs to focus on the advantages and disadavatnages of short term spec, and what the trade off is. Instead we are getting a predictable avalanche of “OMG!!! ECOMINC ILLITERATESS!!!1211? from the usual suspects ignoring the fact the proposal comes from a nobel prize winner in economics”

Yes, but in a very specific situation. Tobin was arguing this at the tail end of the Bretton Woods system. When we had fixed currency exchange rates. A system that was falling apart. Tobin thought that it was self-evidently correct that governments should be able to continue to decide esxchange rates, those naughty markets should not be allowed to interrupt politicians rightly deciding what money was worth.

Thus the sand in the gears. He didn’t want to simply stop short term speculation. He wanted to stop the ability of markets to reach a market price: preferring that prices be set by politics.

“Instead we are getting a predictable avalanche of “OMG!!! ECOMINC ILLITERATESS!!!1211″

Ummm when the person campaigning for a new tax asks ” what do you mean by tax incidence? ” it is Painfully clear they are illiterate – So what would the average rational individual do? Learn about the issue they are trying to influence or go on to spend months churning the same fallacies and avoid at all costs any questions put to them?

Would be very interesting to witness the liquidity provided by the short term players removed from the market for then we could see if it has “value” but hey ho maybe soon someone is going to stand up and say enough is enough – Europe has had enough damage inflicted to it by the economically illiterate dreamers in the last decade and no amount of debate or reasoning talked them out of it and now we all have to face the consequences of there creations.

There is much confusion here, ably cleared up by several posters above, but a couple of things.

One, Owen T’s focus on high-frequency trading has a point but not with a financial transaction tax. He mixes up derivatives, HFT and FTT into a noxious soup of ignorance. Even to fans of financial markets, HFT raises serious issues about market equality / level playing fields and there are City investigations afoot that hopefully will limit it. However, a FTT to ‘fix’ HFT is like using a pair of scissors to mend your car – the wrong tool for the wrong job.

Two, the Left, and European leaders, have decided that by attacking transactions they have found a politically effective tool to advance their agendas. After years of market-types fetishing liquidity they think now is the ideal time to counter that.

There are two risks here, one is context: the problem in the financial markets now is the opposite to that of 2006-7, there are very, very few transactions (“good” or “bad”) and that is weighing heavily on asset prices which is bringing down European banks which is preventing any sort of solution to the continent’s debt crisis. Look at Commerzbank’s results on Friday if you don’t believe me. Attacks on market liquidity at this time seem rather poorly timed to say the least.
Second, the long-term benefits of ‘throwing sand in the works’; I am thoroughly unconvinced that the motivations of European leaders is to make finance more transparent, open and responsible to taxpayers. These elements have no history in mainland Europe and this attitude has hardened since the crisis.

“This is dishonest: the EC impact assessment suggests a 0.5% to 1.76% impact over 20 years,”

And that’s dishonest from you Owen. The EU actually says 0.5% to 3.5%.

1.76% is already the middle estimate.

@27 – 0.05% will “destroy” the value when you pay in?

Say, do me a favour, remind me what the government’s next big pension scam will require you to pay on putting cash in? Oh right, 2%.

“Do you think they’d give us our tax revenue back or use the money instead to prop up their pet projects elsewhere?”

So we want to build another financial bubble? Do we want to shift away from an over-reliance on the City?

George Osborne has stuck it to EU finance ministers during a debate on a European financial transaction tax.

As the Italian bond crisis threatens to tear the eurozone apart the Chancellor asked: “There will never be agreement on this. Is this the best way of using our time?”.

He warned that pension funds would be hit and that an EU tax would see 400,000 financial sector jobs threatened as companies moved to the US and Asia.

“No bank will ever pay this tax,” he said. “It will be pensioners who pay.”

@34 – Again, why you use a two-tier structure. Given the interest in growing economies like part of South America…

What interest would that be?

@36 – You’re unaware of their interest in a FTT? Er…

Oh I am sorry, you said “interest” not popularity ploy political fuckery. But hey I am glad they are “interested” Now lets see them come together with France and Germany in the next few months and establish this tax, leading the world and showing the way, lets SEE there interest translated into solid action..because that’s the only interest that counts little man.

@38 – Gee, the hard right get all upset when I point out things which are happening. There’s a lot of movement towards a FTT, it’s the UK and US who are standing out – the beacons of inequality in the first world – as opposed.

It’s almost like you, and they, are defending vested interests.

Happening? I have been reading and following the push for this tax since 2009 & nothing has happened, lots of noise, lots of fuss, they handed the ball around on the international stage, the music just stopped and they were the only ones left holding it..

We have been told it no longer need to be global to work

We have been told the design takes care of all its faults

And we have been told that the committed will push ahead regardless, due to there level of commitment…WELL DO IT!!!!!!!! France German and South America show the world how its done.

@40 – *yawn* You’re a boring troll.

International agreements take a long time to hammer out. The FTT is progressing quite quickly.

Financial Transaction Tax (FTT) positions at the recently completed G20 meeting as of November 4th, 2011:

(a) Eleven of the G20 nations said they will not participate in the FTT. These countries include: the US, Canada, Mexico, the UK, Australia, China, India, Russia, Saudi Arabia, Indonesia and South Korea.

(b) Argentina and Brazil said they will only support the FTT if it’s world-wide, including Switzerland, Hong Kong and Singapore. (Switzerland, Hong Kong and Singapore said they will not introduce any new transaction fees or taxes into their financial system.)

(c) Japan and Italy expressed reservations and are unwilling to commit to the FTT at this time.

(d) Germany, France, Turkey and South Africa unconditionally support of the FTT.

Current EU positions on the Financial Transaction Tax(FTT) as of Novermber 8, 2011:

(a) Britain, Sweden, the Czech Republic, Romania and Bulgaria said they will not participate in the EU-FTT.

(b) The Netherlands, Italy, Ireland, Malta and Finland said they would only participate in the FTT if all 27 EU nations are included in the tax.

As I said, progressing quite quickly from 2 supporters a year ago.

I’m reading lots of ‘theory’ arguments here – but not sure theory always applies in practise. (lots of cases where things are over-determined and any theoretical approach is as likely to focus on the wrong factor).

Ignorning for now whether FTT generates revenues – assume not.
I’m scratching my head instead – on the question of trading volumes.
The big headline scratch – is whether a FTT that redcued volumes would matter.

I read in the FT some weeks back, that due to the recession, the level of trading in some markets is hugely down – 90% down. But – there have been no volatility panics (wish I could remember which market).

So given that the level of trading in mst markets is way higher than it was 10 and 20 years ago

Q1) is it true that trading levels are much higher than is needed just too reduce volatility?

Does that mean that the mantra no longer is true that ‘any volume drop = more volatility’

Q1b) does it matter if volumes do go down – won’t volatility not be much changed?
(Yes, lets not have volumes drop 99.9%…but say 50 or 90%.

In Germany – people’s mortgages on their houses are always taken out on a fixed % for the whole term – unlike the ‘variable rate’ basis we have in the UK.

That makes for certainty – and no need for consumers to shop around.

Make the analogy to pension funds – they are a long term investment – there is no reason for rapid trading . As every transaction has a transation fee paid – to happy middleman!

Q2) who benefits from keeping volumes as high as possible? Is it primarily the City institutions who make a fee per transaction?

Is it a self-serving mantra to oppose FTT – simply because a FTT would reduce income for city firms as trading volumes fell ?

” *yawn* You’re a boring troll.

International agreements take a long time to hammer out. The FTT is progressing quite quickly.”

Since when did “unconditional support” “we will impose this tax on a national level if international agreement can not be reached” require international agreement? As I said the music has stopped they were the only ones left holding the ball now lets see if they honour there pledges, but you cant stomach that can you leon,after international refusal your still basing the case on its implementation upon…international approval….nice to see even you have faith in the politicians to honour there words…

“Q1) is it true that trading levels are much higher than is needed just too reduce volatility?”

Buy ( good luck doing so ) ten thousand illiquid penny stocks then sell them all at once! Watch what happens….

@ leon wolfson

What is this 2% you are talking about?

The FTT doesn’t sound like much of a tax but even that tiny amount taken away from every payment in and out of a pension fund will add up very quickly, not to mention the compounding effect over 30 odd years of not having as much in the fund.

Osbourne is completely correct in saying the pensioners and savers would pick up most of the bill.

What I find is truly disgusting is you would rather have british taxes pay for propping up the euro experimwnt rather than on expenditure at home. The FTT will mostly hit the UK yet europe will take and distribute the money as it sees fit – not to mention that it will reduce gdp and tax reciepts across europe.

I do find it astonishing that there is no comment on LC about Osborne’s, (Sorry Gideon as he is often referred to here), speech on the vapid stupidity of the FTT.

Nothing to say on that?

FT – 5 July 2011- page 15 – ‘ShortView”

“Even the deep and liquid Treasury Bond Futures has less trading than it did, with June volumes down year on year more than 90%”

Isn’t that a YES to the question:

> is it true that trading levels are much higher than is needed just too reduce volatility?

@48 – 2%? Said nothing about 2%.

“What I find is truly disgusting is you would rather have british taxes pay for propping up the euro experimwnt rather than on expenditure at hom”

What I find disgusting is that you support the British economy being floated on an unsustainable bubble which damages this country’s economy in the long term. Moreover, the health of our trading partners is critical to us.

No surprise you think the bankers are more important than anyone else, of course.

@49 – Why repeat propaganda?

““Even the deep and liquid Treasury Bond Futures has less trading than it did, with June volumes down year on year more than 90%”

Isn’t that a YES to the question:”

Not quite – it depends on the product and market conditions for instance we can cut the volume in the equity markets by 99%, volatility will remain low as long as the large funds do not buy or sell positions , what’s the point in having a market?

“Why repeat propaganda?”

The commissions report which Osborne quoted his facts from on the FTT is not propaganda, Jesus is there anything you loons wont brush aside to keep your views valid?