The European Robinhood Tax overcomes a major hurdle


10:01 am - October 24th 2012

by Owen Tudor    


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Yesterday the European Commission gave the green light to the adoption of a Financial Transactions Tax (FTT) by 10 European countries, bringing a Robin Hood Tax that could raise €37bn a year one step closer.

The Commission’s decision means that the proposal is legal under EU law, and meets the criteria for a process known as the Enhanced Co-operation Procedure (ECP) where a subset of EU member states want to do something where unanimity cannot be achieved.

The Tax Commissioner, Algirdas Semeta, said:

“in difficult times, fairness matters. And the FTT is the epitome of a fair tax. It will also help to deter the casino-type trading we’ve seen too much of, and re-focus the financial sector more on supporting the real economy.”

The next step is for the Finance Ministers’ meeting (ECOFIN) on 13 November, to agree. It’s still possible that other countries could join in, and there is still scope to improve the measure originally proposed by the Commission in September 2011 (for example to prevent avoidance by adopting the same principle that underpins the UK’s stamp duty on shares).

There’s an excellent summary of what was decided today, and what the next steps are.

Alternatively, it is also still possible for a blocking minority to be mobilised to prevent the coalition of the willing proceeding – but so far governments like the UK seem willing to let the measure go through as long as they don’t have to join (there’s a curiously balanced approach to the issue even in the comments on this dead straight ConHome blog by Iain Anderson.)

The 10 countries which have already written to the Commission indicating that they want to proceed is Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain, including four of the five biggest economies in the EU: no prizes for guessing which one is the odd one out! Estonia, which had been expected to sign up, could well still do so, and unions and campaigners will be lobbying several other governments to join in.

Not surprisingly, the Robin Hood Tax campaign are delighted.

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About the author
Owen Tudor is an occasional contributor to LC. He is head of the TUC’s European Union and International Relations Department and blogs more regularly at the Touchstone blog.
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Reader comments


“What we don’t know yet is if whether the tax will just apply to activity taking place within these countries or if it will have wider – known as extra-territorial – application across all 27 EU member states”

Although it is possible for a blocking minority to appear, if they design it so it reaches no further than there own country’s and exchanges, there wont be a problem will there.

Robin Hood is two separate words.

Free money with no impact. Nobody will miss it. Genius at work!

Free money with no impact. Nobody will miss it. Genius at work!

Take it that’s supposed to be irony?

Don’t you know that all money raised from taxation is free money?

Tosser.

I work and pay tax and you think that’s free? Not to me it isn’t.

Either you’re being ironic or just supremely ignorant.

Even a tiny percentage cut on every transaction will give the edge to a country which has not opted into this tax. Spot the EU country that is keeping well away — the UK. I guess that the City will be looking forward to getting more business should the tax go ahead.

I’m all for this. Let’s have the RHT in a group of countries. Then, in a couple of years, we can see whether the total tax take in those countries has in fact gone up. Or whether in fact it falls, as the EU’s own briefing paper insists that it will.

And then we can dump it for a new tax that reduces total tax revenues is really a very silly tax indeed.

That it would raise €37 bn per year is utter fantasy. That this would be collected without impacting other revenues is even more deluded.

Whether it raises any money at all as total tax revenues is debatable. The EUs own investigations (which Worstall points out) predict that total revenues are reduced. But why some people are enthusiastic is that it surely means that less is collected for national governments and more for central EU budget, and that budget is much less accountable to citizens than national budgets.

The British seem to be skipping the system. Good for you, but unfortunately the fools in my own country’s government seem to be more intent on appeasing internal policy hacks than actually worrying about revenue (which the Swedes already tried out for us, and which is why they stay away from this like it had leprosy).

pagar, I think your irony meter is on the blink.

10. Fond McCagan

I don’t think the supporters of the so-called Robin Hood Tax realise that the conditions for gambling and speculation on the world’s stock exchanges have disappeared never to return with the financial collapse of the banking system in 2008. As a result of a thirty-year credit bubble turned Ponzi Scheme designed to cover up overproduction but which greatly exacerbated it the world capitalist economy is bankrupt and there are trillions and trillions of counterfeit claims on wealth all looking to be monetarised at the cost of the real economy and ordinary people. This is without going into the moral question of whether it would be right to make billions more of the poorest individuals cheerleaders for and stakeholders in the creation of seriously damaging speculative bubbles and the ruthless exploitation of their fellow human beings and nature. No, the Robin Hood Tax even if it were possible which it is not is a recipe for mass degeneracy.

@7 – that is clearly the best way forward. See what happens and then we know whether it is a good idea.

In the interests of transparency, are you prepared to say what criteria you will judge the tax? Then we can start benchmarking and figuring out how to measure this (which stats to use etc)

Can someone knowledgeable explain the difference between this and the British stamp duty? The 2011 press release says “The exchange of shares and bonds would be taxed at a rate of 0.1% and derivative contracts, at a rate of 0.01%”. We tax the first at 0.5% already, don’t we? So is this about the derivatives – and are they still at a proposed rate of 0.01%?

“@7 – that is clearly the best way forward. See what happens and then we know whether it is a good idea.

In the interests of transparency, are you prepared to say what criteria you will judge the tax? Then we can start benchmarking and figuring out how to measure this (which stats to use etc)”

Well, we tend to try and work these things through in theory before we even try them out in the field. And the RHT doesn’t pass any of the basic theoretical tests either.

As to testable hypotheses on the success or failure?

This looks reasonable enough

http://hemiposterical.blogspot.pt/2012/10/an-experiment-on-financial-transaction.html

pagar, I think your irony meter is on the blink.

I’ve never believed that irony cannot work on the internet but time after time I am proved wrong…..

Never underestimate man’s capacity for mind blowing, gut wrenching, sense flipping stupidity.

15. Luis Enrique

Tim @7 but there will be a thousand and one other things going on that will cause taxes to rise or fall over that period.

that paper you keep citing that says the FTT will cause tax revenues to fall – does it mean tax/GDP will fall, or that they real quantity out output will fall, so that even if tax/GDP is constant, tax will fall in real terms? I thought it was the latter (real quantities) in which case you’re never going to be able to look at the data and test that, because real GDP will probably rise, the question is whether it would have risen faster absent the tax.

what we need is a control group of countries that are like the FTT adopters in every respect apart from FTT adoption. We don’t have that.

16. Karl Hungus

Independently of raising revenues, the Robin Hood Tax will deter frenzied stock market trading.

Most shares are now held for an average of a few months. This means that shareholder pressure on companies is to generate immediate returns by slashing jobs, research, investment etc.

If the RHT can put a significant dent in the extent to which shares in European companies are traded, it will give those companies a huge competitive advantage over rivals in the UK who will be unable to take the same long-term view.

Of course, it’s much easier for the mainland Europeans to say that high frequency trading is damaging to the real economy. Both on the mainland and here, it’s probably true but countries like France, Germany etc were n’t daft enough to build their economy around zero-sum speculation and we were.

So the impact of any job losses over the channel from Robin Hood will be negligible, whereas here they’d be more severe (even if beneficial in the long-run).

@15 there are simply too many variables to make that idea practical. However I think we should start by simply asking how we measure success/failure. Even sticking to the basic ‘does it raise money for the government?’ we still need to calculate alternative revenue streams that may reduce as a result – i.e if jobs are lost then income taxes from those jobs will reduce.

This gets more complicated when we try to ask things like ‘does it increase the cost of a mortgage to the end user’ as there are simply lots of things that effect this we’d need to control for.

@15 Luis, there might be a thousand and one other taxes, but there will only be one RHT. And it only affects specific transations. So it will be easy to spot if it works or not. Keep track of the tax receipts and monitor the number of transactions that take place – simples!

19. Luis Enrique

smb

I agree the quantity of revenue it gathers directly is of interest, and in theory easily measured. But what we want to know is whether the FTT causes reductions in tax elsewhere, for example because the UK loses some financial sector activity to other territories, that offset the revenues it gathers directly. Even harder to measure is the idea that the FTT might cause the real level of output to fall, relative to its path otherwise, which I think is the prediction that lies behind this piece of EU research Tim likes to quote showing the FTT will cause tax revenues to fall (i.e. that’s a different claim from saying the nominal sum of tax will fall or that tax relative to GDP will fall).

“Keep track of the tax receipts and monitor the number of transactions that take place – simples”

If that is the only way we monitor this, then we will simply end declaring it a success.

As Luis says, those arguing against it are saying it will reduce the amount raised from other taxes so the overall effect will be negative.

The EU commission simply refuse to look at reality. There are some million-dollar deals that will yield thousands of dollars in tax if they aren’t re-routed out of the EU (as the analysis prepared for Barroso forecast that many of them would) but there are tens of thousands of tiny deals – every month’s contribution into a sharesave scheme, every tiny slice of a stock that an index fund has to buy when it gets money in or has to sell to raise cash to pay for a rights issue just for starters, where the cost of levying and recording the tax will exceed the tax raised. That reduces profits by more than twice the tax collected. If half that profit went in bonuses, taxed at 58% direct including Employer’s NI, then VAT of 20% on most of take-home pay and half to shareholders: CT of 24%, and higher rate tax on say half the dividends, you have already lost more tax than you gain before the knock-on effects of GDP.
The purpose of this tax is to divert cash from the UK to Brussels unaccountable bureaucracy. Cameron has blocked that pro tem but Barroso has gone ahead anyway to avoid loss of face.


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  5. Innerwisdom

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