Alexander Pannett 1.07pm
It appears we may need to get the red carpet out for our new business guests from France earlier than we thought we would.
Francois Hollande has this week implemented the Financial Transactions Tax, commonly known as the Robin Hood tax. This is a 0.2 per cent levy on share trading in France. The Gallic plan is for the tax to become implemented Europe-wide, which would disconcertingly hit the City of London, Europe’s largest financial centre, more heavily than anywhere else.
Craig Barrett wrote the following about the perils of the tax in August last year.
“A Tobin Tax seems to me to be much the same. It’s not even particularly pretty. It is referred to as a “Robin Hood tax” in the mistaken belief that it takes from the rich and gives to the poor, missing the point that Hood was simply returning the proceeds of over-taxation to the tax-payers rather than acting as some species of socialist redistributor.
The compelling results of a study made by the Adam Smith Institute demonstrate that a tax on all trades from one currency into another simply wouldn’t work. For Britain, it could be disastrous. Some 20 per cent of the UK’s GDP is generated in the City of London, whose generated wealth is already subject to taxation. Foreign exchange trading in the UK accounts for 36.7 per cent of the world total. If we were to adopt a Tobin Tax, that proportion would surely fall - the revenue gained from further punishing the financial sector would come nowhere near to replacing the revenue lost as a result of the inevitable flight of financial institutions to other jurisdictions.And that’s because for a Tobin Tax to work, it has to be universal.”
I also had this to say about the tax back in November last year:
“A Tobin tax would not have prevented such extreme short selling as the temporary bans did and would have hampered market reactions to flawed economic models. It would not have prevented the credit crunch nor would it have alleviated the consequences of the financial crisis.
Worse, the tax would have a disastrous effect on London’s position as the world’s pre-eminent financial center. The City competes in a global market and the tax would result in the cost of trading being higher than competitor financial centers in Asia, North America and the Middle East. Investors and financial institutions would move their business away to cheaper jurisdictions, which is why the tax has not received any support outside Europe for it to be implemented by other major financial centres.”
I would also point out that the UK ‘s decades old stamp duty reserve tax of 0.5 per cent. on share transfers has not prevented the worst excesses of the City. It did not prevent the recent LIBOR scandal or the Credit Crunch. Therefore the argument that a further tax of 0.2 per cent. on financial transactions would be a panacea to the current financial malaise rings hollow.
The tax probably should not even be known as the Robin Hood tax. After all, Robin Hood’s main objection was that the hard working parts of the population were disproportionately paying for the luxurious pursuits of the more leisurely inclined. Throw in some green tights and some dodgy American accents and you are pretty much there.
Quite the opposite to the French tax, which should be more accurately called the Ned Kelly tax, as it steals from hard working types and the perpetrator wears a giant steel helmet, blinding him to the real world and allowing him to ignore all criticism……..
For more on this subject, see Craig Barrett’s article from August: ‘The Robin Hood Tax is a soundbite tax worth ignoring’.
Follow Alexander on Twitter @alpannett