That would be Seamus Milne, son of Alistair Milne Director General of the BBC, ex Communist and still defender of Stalin, who recently supported looting mobile phones, on the basis that the Banks had “Looted the country`s wealth “…that prattling public school parasite Seamus Milne ?
Even fatuous loon Milne , admitted that the City created huge profits and revenues to the Exchequer which you have no plans to replace in an article where he blamed banks for bond attacks ( Bonds are not much traded so its a disingenuous attempted to conflate to entirely different subjects ).
His answer was to have Nationalised Banks forced to invest in some Five Year Tractor Plan an idea Oswald Mosley was an enthusiastic proponent of .

ROBIN HOOD Stole from the State who had taxed its citizens into penury to finance their vainglorious international projects. The Poor were poor because the Sherriff of Nottingham kept increasing taxes which he could as an officer of what was the most centralised state in Europe
This is a bizarre name for a Tax which will similarly impoverish the English again in furtherance of some idiotic international dream sponsored by our enemies.

Impressed I am not

The headline says that the city is receiving a subsidy – but no where in the article does it explain how that is happening.

The city generates a huge amount of tax revenue for the government — it bankrolled much of the past Labour government spending boom — so how how were they subsidised if they were a net contributor?

The bailout isn’t a subsidy, unless you consider the same for British Leyland, British Coal etc (and demand that they are taxed at a higher rate to refund the subsidy).

Intrinsically, I am not against a transaction levy of the sort that many industries have – so long as the funds go into an industry bailout fund, and are not used by politicians for their pet projects.

However, please explain where this subsidy idea comes from – it is most perplexing.

Just another example of the big lie of this govt “we’re all in it together. ”

You see the elites believe in austeriy……….but not for them. It is modern day ” let them eat cake” A deep deep recession is no problem for the rich. So austerity will be borne by the masses, not by them. In fact austerity is a geat excuse for disaster capitalism. Opportunity abounds to slash and burn baby burn.

Something quite appropriate about a govt old Etonions presiding on ever growing unemployment for the people.

Owen,

You’re still ignoring the real points being made.

1) Even the EU report says that an FTT will shrink the economy. And that this will therefore reduce total tax revenues by more than will be raised by the FTT directly.

This really is a tax that will reduice revenues, not increase them.

2) Have you found out what tax incidence means yet? You did promise, several months ago, to try and find out. Is it too difficult for you or have you just not bothered?

I commend this little report to you.

http://www.iea.org.uk/sites/default/files/publications/files/Financial%20Transaction%20Tax_0.pdf

And yes Owen, would be fascinated by whatever you might have to say about it.

“The Government ended the week emphasising its support for a global tax (although that would have exactly the same impact on the finances of the City),”

No, it wouldn’t. The fact you can’t tell the difference is a stunning example of why you have zero authority to speak on this subject.

@2

“The headline says that the city is receiving a subsidy – but no where in the article does it explain how that is happening.”

Obviously its subsidy is that its transactions are free of VAT. If transactions in the fashion industry were free of VAT, that would be a pretty obvious subsidy, wouldn’t it?

Govt likes it’s corporate welfare. Sorry subsidies.

Front page of the Indie says they are about to give a shed load of money to Britain’s house builders, and the tax payer will take on the tole of guarantee to protect private mortgages.

Can’t wait to see the free market trolls defending this.

“Obviously its subsidy is that its transactions are free of VAT. If transactions in the fashion industry were free of VAT, that would be a pretty obvious subsidy, wouldn’t it?”

No, not really. Leave aside that the absence of a tax is not a subsidy and think on this: who is the subsidy to?

For we don’t have VAT on children’s clothes. Do we regard this as a subsidy to manufacturers of childrens clothes or to parents of children who must buy them clothes? Do we regard the absence of VAT on food as a subsidy to farmers and supermarkets or to people who must buy food?

Quite, VAT is a tax on final consumption: so therefore the absence of VAT is a subsidy to consumers, not producers.

An FTT will;

- reduce european GDP
- reduce overall tax revenues
- not be paid by banks, but by their customers
- massively increase the cost of borrowing
- cause job losses
- make markets more illiquid and thus more volatile
- be a tax transfer from the elected UK government to the unelected euorpean commission
- cause a lot of financial firms to move their offices offshore to avoid the tax and remain competative

Now tell me, where are the positive points? It won’t raise money, but cost it, it will damage growth and make it harder for comapnies and individuals to borrow. It’s basically just a power grab from europe to enable the EC to have its own independent tax revenues.

Clearly owen tudor either understands none of this, or willfully wants to cause damage to the european and UK economies to further his union class warrior credentials.

Meanwhile German Finance Minister Wolfgang Schauble responded by arguing that if all other transactions were taxed under VAT rules, it didn’t make sense to exempt financial transactions.

Is a financial transaction adding value then? If you follow this line of argument, you would have to accept that banks add value to society (value added to a good is value added to society), and that financial transactions should be encouraged because of this.

If however, as seems more likely, financial transactions only add value when they actually buy a good or service, there is no justification for this line of logic. Although Herr Schauble does seem to have lost the plot recently (although to be fair to him, I don’t think the Germans call in VAT anyway, so this may be a translation issue).

The EC claims the financial sector enjoys a tax advantage of around E18bn because of the VAT exemption. Yet the EC says itself this estimate should be treated with caution.

“The reality is the sector already pays very significant amounts of irrecoverable VAT to EU governments which would become recoverable if the sector became subject to tax. Even if VAT were chargeable on financial services, business consumers could generally recover it so governments may not get as much as they expect.”

Subsidy or not, the question must be whether, on balance, an FTT will be a good thing? Will it help dampen the excesses of finance, provide a useful revenue flow and go towards the re-balancing of our economies?

I don’t think many people actually believe that things are OK as they stand. Politically there are outstanding issues as the population still pay for the mistakes of the (unpunished) financial sector. The lack of real reforms in finance and its governance and the inability of governments (or anyone else) to tackle our financial woes have led to a sense of “Do something! anything!” In these terms this smacks of desperation.

Of course, the size of the proposed tax will be crucial. It shouldn’t stop there though, we need a European commitment to ending tax evasion and higher tax rates on the highest earners.

I’ll ask this question again as it has been ignored so far by the proponents of a FTT.

We have a transaction tax on land – it’s called stamp duty land tax and it is a tax at up to 5% on transactions of land in the UK. Where is the evidence that this tax has had any ameliorating effect on the proprerty price boom that we have just been through in the UK (and may in some parts of the UK still be in)?

Tobin described his proposed tax as ‘grit in the system’ to slow things down – has SDLT slowed the property price boom at all?

The next problem for the proposed FTT is that in many transactions that are complained about, the margin is a matter of pips and the proposed tax, even at 0.5% or 0.05% would be a multiple of the margins involved. As a result, it strikes me that the transactions would simply disappear altogether within the sphere that the tax is applied – as a result of which no revenue would be raised at all.

Please will someone who thinks that this tax is a good idea explain to me why they think it is a good idea?

After @ 9, there’s simply no more to be said! Meanwile, those of a strong socialist faith will continue to rant, despite the evidence….Bless ‘em: so archaic and yet amusing…

jeex…does no one here know that the financial services are net payers of VAT because ofn the partial exemption rules….they PAY VAT…they pay a shitload of taxes

Diogenes? Theophrastus? The Greeks are here bearing financial advice!

@8 Tim Worstall

“No, not really. Leave aside that the absence of a tax is not a subsidy”

Well, if you want to get tied up in the difference between a subsidy and a tax break, go right ahead – but clearly one industry not paying tax on something that all other industries do pay tax on is an advantage built into the tax system, and one which, in the case of bankers, needs to be immediately removed.

“For we don’t have VAT on children’s clothes. Do we regard this as a subsidy to manufacturers of childrens clothes or to parents of children who must buy them clothes? Do we regard the absence of VAT on food as a subsidy to farmers and supermarkets or to people who must buy food?”

And evidently, the answer here is that it is a subsidy to both buyers and sellers. It is a very rare tax indeed that is born entirely by consumers, or entirely by producers, and VAT on clothing is not one of those taxes.

However, this is entirely irrelevant to the banker situation, because in those cases both the purchaser and the seller tend to be financial institutions. So, it’s either a subsidy to bankers or to bankers. Not sure that’s a winning argument for you, dear.

I think what you say there is a reasonable case Ciaran but that is something that ought to be decided democratically in the UK not imposed by Germans and French who just want to kill off the City of London.
There is a history here,since the Glorious revolution when Dutch Banking skills were imported, Britain raced ahead in the creation of financial instruments and it is an area in which we have a comparative advantage. Germany has an advantage in Engineering and it has protected its position by retaining a hugely undervalued currency. I am not sure it would seem fair for German to kill of our industry whilst they continue to run a trade surplus with us by dumping half price BMWs and AUDIs on the market, preventing us form re starting high level manufacturing.( et al). If we were starting from day 1 .Now it would clearly impoverish the UK and I cannot see that it is any of their business to set taxes for us .

Why not set a tarriff on German Cars . That would have a better rationale ..and then …..

“However, this is entirely irrelevant to the banker situation, because in those cases both the purchaser and the seller tend to be financial institutions.”

Are you sure you know how VAT works?

Two financial institutions, trading back and forth between each other. Charge VAT on it. All that happens is that the VAT that has been paid by each institution is netted off against the VAT that has been charged by the same institution on the counterpart trades.

The net amount of VAT collected by the Revenue is nothing: because both institutions will be VAT registered and thus can reclaim all the VAT they pay.
The only people who cannot reclaim VAT are individuals.

VAT is a tax collected by companies, it isn’t a tax paid by companies.

OK, there are a couple of minor cash flow and paperwork complications but that is pretty much it. The imposition of VAT would have no effect on intercompany transactions and the effect on the sector as a whole would be whatever change came from the services being 20% more expensive to end consumers, those end consumers who are individuals.

It’s not even certain that it would be an overall revenue raiser either. Because baking services do not currently carry VAT then banks are not allowed to reclaim the VAT they pay upon inputs. If banking services did carry VAT then they would be able to reclaim those.

There are other ways of taxing banking without using either an FTT or VAT. One that actually solves a real problem is the banking levy. It charges for the implicit subsidies the too big to fail banks receive re deposit insurance. Bloody good idea.

The second is a FAT which is a bit more complicated but if people were really interested in taxing finance in a reasonable and honest manner that’s the one they would be promoting.

@Tim Worstall

Even the EU report says that an FTT will shrink the economy.

A banking sector without the transaction tax shrank the economy by 6pc and lost us 10pc in output permanently.

Cash put up to bail out banks and provide guarantees = £1.4trillion. Again this is WITHOUT the transaction tax.

So let’s stop this screeching about how the FTT will kill our banking sector. Because that sector pretty much did for our entire economy.

Just a few responses – apologies, very late at night!

Ianvisits – you’re right, my article doesn’t refer to subsidies as the headline suggests. It isn’t my headline (I went for “Government ramps up anti-Robin rhetoric” because I like alliteration, even if imperfectly done!) However, the finance sector definitely IS subsidised in at least one crucial way: the implicit promise to bail out banks gives them a credit rating which allows them to borrow money much more cheaply than they would otherwise be able to. The Bank of England estimated the size of the subsidy at £100bn a year (it varies from year to year, but it’s around that much.) It is also true that most financial transactions do not attract VAT (or, because there’s a lot of comment on this thread which conflates the quantitative and qualitative meanings of ‘value’, sales tax), but I probably agree with those who say absence of a tax is not necessarily a subsidy (although I can think of at least one circumstance in which it would be.)

Lee, point taken, even though done rudely (it’s not necessary you know – and it makes it less likely people will answer your comments: I always try to work out whether I would be happy for my mother to read my comments, and if she wouldn’t be, I’d try not to post them). But even my friends at the CBI have agreed that there is a fundamental inconsistency in the Government’s professed support for a global tax (while they actually oppose it when they think no one is watching) and their public opposition to it at European level – it’s possible to hold that position in a way which is consistent, as you say. But they don’t.

Tyler, I do understand the assertions you make about the likely impact of an FTT, honestly I do. I just don’t agree with them: in most cases, I would assert the opposite of what you write. And I therefore conclude differently, as logic would dictate I must.

Evan, the high frequency trading I would like to ‘slow down’ happens many times an hour. Homes are not traded several times an hour, so on that basis, stamp duty does indeed seem to have the desired effect (this is nonsense, of course, but I use it to illustrate that your original premise is flawed.) However, I totally agree with you that the level of the tax rate applied has to take into account the margins of the trades: that’s why I think you need a very much smaller tax rate on forex and derivatives than on stocks and shares. And you’re right that at a certain level, an FTT would make certain transactions uneconomic and therefore they wouldn’t happen. Our assumptions are based on a shrinking of the market in derivatives, and our estimates of revienue are therefore considerably lower than you’d get if you simply multiplied the current value of all financial transactions by the tax rate.

Paul, on your second post, I absolutely agree that the tax should not be imposed on the UK, but I think you are wrong to assume the French and German governments are motivated by the desire to destroy the City – I’m pretty certain that if they can’t secure agreement more widely, they would implement at least part of the FTT unilaterally. And I think that the argument (which I’ve heard some UK Government representatives make as well) that taxing something the UK does a lot while the French, Germans, Italians and Spanish do less is unfair because how would they like it if we taxed something they do a lot of and we don’t do much is a pretty poor argument. After all, how would they like it if we taxed wine a lot? Oh, hang on….(Cheers!)

@19 – So let’s hear your opposing proposal, rather than simply a defence of the city!

“The Bank of England estimated the size of the subsidy at £100bn a year (it varies from year to year, but it’s around that much.)”

No, it was around that in one year. The year following the crisis, when the government were clearly and aboviously not going to allow another bank to fail. In more normal times it’s a few billion a year. Something which is being addressed through the banking levy. As it should be.

For everyone is right, banks should not get subsidies. This particular subsidy is that deposits are insured, because no one will let the bank fail, but the banks/depositors are not paying for that insurance. And that’s what the bank levy does, charges an insurance fee for those deposits which are not already insured under one or other of the other schemes out there.

It’s also only charged on those banks that a deemed “too big to fail”, as of course those are the only banks which enjoy that explicit insurance against failue.

This problem has already been dealt with.

“However, I totally agree with you that the level of the tax rate applied has to take into account the margins of the trades: ”

Thus you should be arguing for an FAT not an FTT.

QED.