Now That Europe’s Got A Robin Hood Tax Let’s Not Have One
THE Robin Hood Tax people are all ever so excited. Half the countries over in the eurozone have now been given permission to have one and it looks like France will get one around the end of 2014. The argument is thus that because they’re all getting such a lovely financial transactions tax therefore we should immediately run off and do the same thing.
However, the correct argument would be, well, seeing as they’re doing this experiemtn why don’t we wait and see what the results are? You know, just check that all hte claims being made about such a tax are in fact correct?
Most of the claims being bandied about will be very hard to check. For example, opponents of the tax, like me, point to the EU’s own report which says that it will shrink the economy from where it would otherwise have been. A bit difficult to prove that: there’s no way of showing that the French economy in 2020 would have been €2 trillion instead of the €1.95 trillion it actually is without the tax.
Similarly, it’s very difficult to point to the taxes that aren’t collected because the economy is smaller. We’ll all see the revenue marked “Robin Hood Tax” but not that that isn’t coming in from corporation tax, VAT and the rest.
However, there is one claim made by the RHT peeps. In fact, it’s part of the justification for the tax itself. They say that excessive trading leads to price volatility. Price volatility is bad and that’s why we need to have the tax in order to reduce trading and thus price volatility.
OK. So, let’s come back in 2019 or so shall we? After France has had 5 years of this lovely tax. And let’s measure price volatility in the countries that had the tax for 5 years against price volatility in countries that didn’t. And let’s see whether this claim is correct: does the tax reduce price volatility?
The thing is, all the economic theory on this (which has all been ignored by hte campaigners of course) tells us that the tax will increase price volatility. So we do have two pretty serious claims here. One that the tax will reduce something we can easily measure, the other that it will increase it.
So, let’s wait and measure. And see who is actually right before jumping in ourselves, eh?
Posted: 24th, January 2013 | In: Money Comments (6) | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink
January 26th, 2013 at 2:23 pm
Why didn’t I see that! – of course – businesses pass on the cost of the taxes they have to pay so really, we’d be better off if we didn’t tax them at all, then everything would be so much cheaper.
January 25th, 2013 at 1:10 pm
And what makes you think that they will not ‘legally’ avoid paying this one. Or at least pass it on to the poor punters down at the lower end of the food chain
January 25th, 2013 at 11:36 am
If large corporations weren’t quite so active and successful at ‘legally’ avoiding paying taxes in the EU (and worldwide0) there might not have been such impetus for this tax.
January 24th, 2013 at 1:28 pm
“A financial transaction taxation is used for a variety of purposes, one of which is to curb “excessive speculation by uninformed financial traders” which can lead to increased market volatility ”
This is the assertion, yes. The important question is actually whether the assertion is true or not. And it isn’t.
You should try reading around some of the critiques of the Robin Hood Tax. The general conclusion is that lower liqudity will lead to greater price volatility, not less.
January 24th, 2013 at 12:51 pm
I think you’ll find this most educating – http://en.wikipedia.org/wiki/Financial_transaction_tax
A financial transaction taxation is used for a variety of purposes, one of which is to curb “excessive speculation by uninformed financial traders” which can lead to increased market volatility – something which we are acutely aware of in the present time. It’s a mechanism which has been used in many countries over many years and has been well studied. It is a device that many monetary bodies, including the IMF, have espoused and its introduction is in no way experimental. We already have some (very small and limited!) transaction taxes. Increasing these further would bring the financial sector a little way towards the level of taxation everyone else has to bear for the current crisis. So why the fuss? Could be because the City doesn’t want to pay anymore tax. So effectively, the rest of the economy has to pay higher taxes to subsidise the financial sector – after all, we wouldn’t want those rich folk who contributed considerably to the current economic crisis, changing their gambling habits, now would we.
January 24th, 2013 at 11:46 am
We don’t have to wait for 2019. We have the example of Sweden’s unilateral attempt in the 80′s
http://en.wikipedia.org/wiki/Swedish_financial_transaction_tax
Bad news for the Swedish economy, good news for the UK as most of their trading moved offshore to London. Let’s hope the same thing happens again.