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The Robin Hood tax, unlike Olympic archery, won’t hit its target

2 August 2012

2 August 2012

The Robin Hood tax has galloped into France, and once again Britain is being pressured to introduce the same thing in its financial sector. It’s a thankless job defending the City at the moment, what with UK banks mired in one scandal after another and Libor-gate still unresolved, but the UK must stand firm in rejecting a tax that, in the words of George Osborne, would be ‘economic suicide for Britain’.

François Hollande has slapped a 0.2 per cent levy on share trading in France, a precursor to a wider European law. Technically a financial transactions tax, ‘Robin Hood’ taxes are so-called because they aim to redistribute wealth from the rich to the poor. David Cameron – who once described the financial transactions tax as ‘quite simply madness’ – and the Chancellor have both said that Britain will consider such a tax only if it’s introduced worldwide, to avoid hurting the City of London. Britain already taxes stock-market transactions through a stamp duty of 0.5 per cent.

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The Robin Hood tax is one of those things whose heart is (probably) in the right place, but whose head is not. It’s hoped that the tax will result in more revenue in a country’s coffers, but the reality is that today’s global investors will just skedaddle to other markets where the fiscal regime is less onerous, meaning there’ll be fewer transactions to tax. Hollande says the 0.2 per cent levy will raise about €1.6 billion a year, and that part of this money will go to tackling global poverty and HIV/AIDS – all very well, but 1) how much of this money will actually materialise and 2) what happened to the freedom to decide where one’s money goes and why? Taxation employed as punishment – ‘It’s time for banks to pay up’, went one placard in the Campaign for Robin Hood Tax in the US recently – is wrongheaded and ineffectual.

Chief executive of Société Générale Frédéric Oudéa, has said that Hollande’s latest move may deter international investors in the eurozone, at a time when it can least afford it. Already, US depository banks are refraining from issuing American Depositary Receipts on French stocks, until ‘further clarification’ on whether France’s financial transactions tax applies to ADRs.

Hollande yesterday had a dig at Cameron, thanking the British PM for ‘rolling out the red carpet’ for French athletes to win Olympic medals, in retaliation to Dave’s remarks that Britain would roll out the red carpet for French businesses fleeing the Socialist president’s proposed 75 per cent top rate of tax. But Robin Hood taxation is one arena where Britain should just let the eurozone nations compete among themselves – unlike Olympics-level archery, its players are highly unlikely to meet their targets.


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  • Major Plonquer

    Dear People of the UK. If you don’t want your financial sector we’ll be happy to take it off your hands. A Big Thank You from the people of Hong Kong.
    We here think what you’re doing will be great for jobs and for the economy. OK, it’ll be much better for ours than for yours but, as they say, we’re all in it together, eh?
    Just one question though: Did Robin Hood pay taxes?

  • Radford_NG

    3 Aug. c.2.20pm. BST…..This is more of a King John Tax.John taxing the Barons for money to do what John wasn’t very good at.In his case fighting the French;in this case tackling global poverty.

  • michael

    nyse-euronext… to avoid the tax do it thro’ the first bit. Hollande’s a slimey wotnot.

  • http://300wordtheses.blogspot.co.uk/ Gerry Dorrian

    If the Europe-wide tax materialises Britain will pay far more than France, which is probably why France is backing it – it’s as if Richelieu never died! As for helping HIV/AIDS, behaviour-change among heterosexual sub-Saharan men is going to do far more than tea and biscuits for more committees.

  • wrinkledweasel

    Not a lot of people know this, but Robin Hood had a brother called Clive who robbed hard-working middle class people to give to the feckless underclass. Strangely, he never achieved mythical status as a hero, yet his legacy lives on and prospers.

  • Stiffit

    “Technically a financial transactions tax, ‘Robin Hood’ taxes are so-called because they aim to redistribute wealth from the rich to the poor.”

    Perhaps the author is too young to remember, or simply forgetful of her economics classes. She can read about the Tobin Tax here:

    http://en.wikipedia.org/wiki/Tobin_tax

    All the original, 1972 onwards, versions of the Tobin and related transactions taxes were intended as technical measures to dampen market fluctuations in FX currency trading and re-balance the struggle between speculators and governments. The direction of the income to Robin Hood projects is a later and quite unrelated progressivist bolt-on which is entirely irrelevant to the desirability or otherwise of this particular tax as it was originally conceived.

    Myself, I’d be very happy to see such a tax, if its proceeds were devoted to a fund to compensate the retail depositors in failed banks. Anything we can do to make banking more dangerous and less well remunerated for bankers, while increasing the protection of private depositors, must surely be a Good Thing.

    • fubar_saunders

      only if its introduced globally, simultaneously, where there is nowhere to hide from it. Doing it unilaterally is shooting oneself in the foot.

      • Stiffit

        0.2% on FX? We already have 0.5% stamp duty. I’ve spent the last couple of years unwinding the ‘products’ sold to my elderly mother by her ‘IFA’. I’ve just dealt with one into which she put £50k six years ago – immediate commission on sale to IFA £3.8k, subsequent fees and charges £4.8k, cash-in value £62k. Compared to that a take of 0.2% by the revenue is a rounding error.

        • fubar_saunders

          I see your point… but thats not how the industry operates. Until we have another way of generating the amount of GDP that the financial services industry does, it might not be prudent to start fannying about with punative measures that may tempt the industry to take that revenue elsewhere… lets see if what happened to Sweden also happens to France…

  • Daniel Maris

    Didn’t the Tories call the national minimum wage madness? Don’t they accept that now?
    If an FTT could damage our financial sector that would be good news. The financial sector is the cuckoo in the nest that is smothering and pushing out the other chicks. It sucks in huge numbers of immigrants (both rich and poor) who all have to be provided with housing and other infrastructure. It is overheating one tiny part of the country and doing v. little to create real economic development in the regions, so exacerbating the problems of welfare dependency.
    We saw how vulnerable it made our economy during the recession – which was deeper than in most countries. Our recovery has been faltering because of the banks.
    Once again our exporters are saddled with a high pound, thanks again largely to the financial services sector I believe.
    It will be interesting to see how the experiment works out in France.

    • Charles

      The national minimum wage prices unskilled people, usually the young, out of a job. It is great for those in employment (who typically get a pay bump either directly or to maintain differentiatials), but dreadful for those who are condemned to a life on the dole. Such a waste.

      However, it may be a bad idea, but politically toxic to try and remove it – mainly because most people don’t have the detailed knowledge of economics to understand what the actual effects are.

      • Daniel Maris

        No, mass immigration does that – even Matt Cavanagh admits it does.

        • Charles

          Mass immigration increases the competition for jobs so it makes life harder for the unskilled because many of the jobs that they would have historically have done are being taken by energetic immigrants (who often have experience or skills) – Polish waitresses etc are a very good example of this.

          The basic issue is simple: if an employer doesn’t believe that someone will add more than £6 per hour of value then it makes no sense for them to employ them (this is, of course, a simplification)

    • http://allectus-allectus.blogspot.com Allectus

      The NMW was and is “madness”.

      Abolishing the NMW and the Low Pay Commission, the useless quango that administers it, would also help make UK labour markets more flexible and competitive.

      We in the UK have a problem with a large pool of unutilised unskilled labour, which has encouraged a culture of welfare dependency and criminality. Abolishing the NMW would help create unskilled jobs and benefits sanctions would create the incentive to take – and to keep – those jobs. Compulsory work programmes and voucher-style benefits could soak up the unemployable rump.

      When the NMW was introduced we were told that it would increase productivity by encouraging investment in new technologies and “upskilling” the workforce. But there is little evidence to support this.

      The sectors where the NMW has greatest impact – sectors like agriculture, hospitality, and retail – typically involve a high proportion of low-tech, low-skilled work, and it is not easy to see how such jobs could be replaced by a comparable number of high-tech, high skilled jobs by capital investment. On the other hand, it is not difficult to see that if the price of unskilled labour falls, demand for unskilled labour will rise. Why, if distortions and inefficiencies such as those caused by the welfare system are eliminated, should labour markets behave any differently from other markets?

      • Daniel Maris

        A madness that is followed by most civilised countries in the world. Why should Sainsbury’s need extra shelf stackers just because there is no minimum wage?

        • UlyssesReturns

          Why should the state pay an unemployed youth £2 per hour to sit on their arse when a company might employ them for £3 to stack shelves or clean dishes?

        • http://allectus-allectus.blogspot.com Allectus

          The demand for unskilled labour, like any other commodity, will, ceteris paribus, rise as the price falls.

          It is sometimes argued that employers will only employ the minimum staff to “get the job done”. But the “job” to be “done” is not something fixed, but will often vary according to whether or to what extent the activities which comprise that job are profitable. If reducing labour costs increases profitability of a certain activity, or turns a loss-making activity into a profit-making one, then the employer is more likely to expand that activity (and less likely to scale it back or discontinue it), and perhaps hire extra labour. By the same token, if an activity is made unprofitable by artificially inflated labour costs (such as those imposed by the NMW), then the employer may well decide to discontinue it and lay workers off. It’s not rocket science.

          • Daniel Maris

            Strange thing is, though, CEO pay seems not to be subject to the iron laws of supply and demand. It just keeps going up and up and up and up…even through the worst recession for 60 years.
            It’s not rocket science – someone has their hands on the money levers.
            £6000 per annum is not a reasonable remuneration for anyone in a country with a per capita GDP of £36000. Only mass immigration would drive it so low.
            That’s why capitalists favour flooding our country with millions of third world immigrants.

            • http://allectus-allectus.blogspot.com Allectus

              Your so-called evidence is impressionistic and your argument platitudinous.

              Mass immigration is a problem, but the fact that there is a large rump of unutilised unskilled labour maintained on the dole at the taxpayers’ expense suggests that the NMW is artificially inflating the wages of some while restricting the supply of new unskilled jobs.

              • Daniel Maris

                There was a “large rump of unutilised unskilled labour maintained on the dole at the taxpayers’ expense” before we had the national minimum wage. Capitalism had no interest in them and has no interest in them now. Capitalists are quite happy to pay them to watch daytime TV on their sofa and smoke dope. It’s of absolutely no concern to them whatsoever.

                • http://allectus-allectus.blogspot.com Allectus

                  This was because of the benefits system allowed them to decline low-paid jobs. Labour market reform requires benefits reform in order to be effective.

            • Major Plonquer

              I agree 100%. So when are you going to start your business and become CEO? Then you can pay lots of people more than other companies pay them, make a ton of money yourself and be a local hero? Or is this just carping from the cheap seats?

        • Major Plonquer

          I agree 100%. Here in China we too have a minimum wage. Then again, your minimum wage is nearly double our average wage so I think I’ll just keep my factories here in China for the time being. A minimum wage is a great idea. It’s just some are more minimum than others.

    • http://allectus-allectus.blogspot.com Allectus

      “If an FTT could damage our financial sector that would be good news.”

      Would it?

      There’s a lot of idle chatter in the media at the moment about “clipping the wings” of the City and “rebalancing” the economy. But the truth is it’s easier for government to damage the financial sector than it is for it to boost manufacturing. It’s an historic fact that the UK possesses a cluster of skills, knowledge and experience which confers a competitive advantage in this area which we don’t enjoy, or don’t enjoy to the same extent, in other areas.

      The financial services industry comprises around 10% of our national GDP. If you add to this the value of specialist professional services – such as those of accountants, lawyers, and management consultants, etc. – provided to the financial sector, then this figure rises to about 13-14% – compared to about 12-13% for the whole of the manufacturing sector. In 2007 the financial sector proper (excluding specialist services provided to it) accounted for 13.9% of the UK’s tax revenues, and even in 2009, after the financial crisis had taken hold, it accounted for 12.1%. In terms of corporation tax receipts, the contribution of the financial sector is still more marked, at 27.5% and 17.7% for 2007 and 2009, respectively.

      The cash generated by the financial sector is a real asset, whereas the so-called costs of “inequalities”, the “dominance” of London and the South East, and our “dependence” on the “bloated” financial sector, etc., are phantoms, existing only in the minds of those who derive more satisfaction from seeing others brought down to their level than seeing them succeed, even if their success would enhance the wealth of the nation as a whole.

      The financial sector is one area where the UK economy still has potential to grow, whereas no amount of handwringing will bring back the heyday of British manufacturing or heavy industry. Should the City lose its status as a global financial centre, it would only be a matter of time before the UK financial services industry shrinks to the size of that of France or Germany, without any comparable compensating boost elsewhere.

      • Daniel Maris

        Yes, but can’t you see this is part of the problem – I am sure it is – that with a highly successful feather-bedded financial sector we attract a load of money which keeps the pound high and makes our manufacturing exports unnecessarily expensive in the world markets.
        It’s not as though the financial sector would disappear overnight – as you say we have lots of knowledge capital here as well as many other advantages (being an attractive world city for instance and having stable government).
        But we shouldn’t be looking to grow it and a contraction would not be unwelcome. The truth is the costs of the financial sector are not borne by the sector. Unlike the manufacturing sector they suck in huge numbers of people from abroad both rich and poor (someone has to clean the offices at 4am). All those people need houses and other infrastructure which our economy has to provide. I don’t think the financial sector covers those costs and the impact on the cost of housing in London.

        • http://allectus-allectus.blogspot.com Allectus

          Where’s the evidence that our financial sector is “feather-bedded”? That it’s successful?

          Sterling is high because of the relative weakness of the euro.

          “But we shouldn’t be looking to grow it and a contraction would not be unwelcome.”

          I’m sorry, but this statement is absurd.

          “… the costs of the financial sector are not borne by the sector. Unlike the manufacturing sector they suck in huge numbers of people from abroad both rich and poor … All those people need houses and other infrastructure which our economy has to provide.”

          What’s the problem with “sucking in” rich people, who will boost the economy? And it is not the fault of the financial sector if lax border controls allow in too many unskilled immigrants and an over-generous welfare system allows those already on the dole to decline low-paid cleaning jobs.

          • Daniel Maris

            The financial sector sucks in huge numbers of immigrants to this country. – both rich and poor. They need housing and they need other infrastructure. Particularly on housing they are competing with UK citizens and driving up housing costs in London and the South East. There is no infrastructure charge on these people coming into the country. So they are getting access to our existing housing resources with no charge and they don’t have to compensate people
            who suffer increased housing costs.
            The financial sector has also been feather-bedded by being rescued by the state to the tune of – what was it, I forget – at least £100billion by now, probably more if you include quantitative easing which seems to be a gift to the banks.
            We’ve got quite enough rich people as it is – we’re awash with them. We don’t need to suck in any more. They don’t add to the sum of happiness of the UK people, in fact they are a major negative.
            We’ve been sold a load of nonsense over the years and it’s still continuing – we have to be a big imperialist nation, we have to import millions of people or we’re all going to die with unwiped a*rses, the rich make us richer…
            I am afraid the illusions have run their course. It’s time we started improving people’s lives and addressing the many real problems we face rather than chasing the financial dragon.

            • Mike Brighton

              Your point cound not be more wrong. Who builds the houses and infrastructure?
              Did the goverment rescue Goldman Sachs no… Morgan Stanley…no Barclays … no Pimco … no Man Group … no JPMC … no etc
              The goverment rescued er Northern Rock, RBS and LLoyds. So the financial sector was not rescued. Certain institutions were rescued by the UK goverment. Norther Rock because it’s CP based funding model based on short term refinancing no longer worked due o the credit crisis, RBS because it’s management was incompetent and LLoyds because the government was incompetent.
              In what way is QE a gift to the banks? It’s a gift to the goverment and stiffs the UKs creditors and pensioners.

              What nonsense have we been sold? Perhaps you are referring to the Labour Party who told us we can have our cake and eat it, spend tons on public services and not raise taxes, deregulate the finance industry without impact, and economic bust would never return. Then yes we were sold nonsense by Blair and then Brown.

            • http://allectus-allectus.blogspot.com Allectus

              The financial sector is bound to attract some immigrants, and it is desirable that it should attract the most highly qualified from around the world. But it cannot be blamed for the failure of immigration and border controls to keep out unskilled migrants or flaws in the benefits system allowing our own unemployed to decline low-paid jobs. You are basically blaming the financial sector for its own success.

              “The financial sector has also been feather-bedded by being rescued by the state …”

              The bank rescue was necessary, and not just – or even primarily – for the sake of the banking sector. The consequences of doing nothing – in terms of lost savings, companies unable to pay staff or suppliers, mass bankruptcies and staff lay-offs – would have been unthinkable. The impact of a loss of confidence in the UK banking system on the rest of the economy would have been catastrophic, and the resulting risk and uncertainty would have massively raised the costs of UK government borrowing on the bond markets. Most of the costs of the bank rescue will be temporary. Moreover, many costs wrongly attributed to the bank rescue – such as QE – would have been incurred even if there had been no bank rescue.

              “I am afraid the illusions have run their course.”

              Perhaps you should address yourself to your own “illusions”, which, once again, you have failed to support with either hard evidence or compelling arguments.

        • Mike Brighton

          ” that with a highly successful feather-bedded financial sector we attract a load of money which keeps the pound high”

          Huh? The value of the pound vs other currencies is not determined by the financial sector “attracting” a load of money whatever that would be? It’s determined by the market juding the long term view of the UKs econmic prospects, balance of payments, goverment debt yields etc…not the financial sector attracting a load of money. As Allectus correctly says the pound is high at the moment as the Euro is reatively weak, actually vs the USD the pound is weaker and the US is our primary trading partner.
          You demonstrate your absolute ignorance of basic finance and economics.

    • Mike Brighton

      I have to fisk this as it’s simply delusional.

      Didn’t the Tories call the national minimum wage madness? Don’t they accept that now? > Yes but it’s widely accepted that its a significant contributor to youth unemployment and NEETS

      If an FTT could damage our financial sector that would be good news.
      > Yes if you think damaging a key wealth and tax generating industry and throwing people onto the scrapheap of unemplyement is good news

      The financial sector is the cuckoo in the nest that is smothering and
      pushing out the other chicks. It sucks in huge numbers of immigrants
      (both rich and poor) who all have to be provided with housing and other
      infrastructure.

      > Whoa. You need to read some economics. Immigation (politics aside) is a huge driver of wealth creation and GDP growth (one of the reasons Labour pushed it strongly). Housing and infrastructure for immigrants drives both emplyment and GDP growth..someone has to build the houses, rent them, bulid and maintain the infrastructure…it’s called er employment.

      It is overheating one tiny part of the country and doing v. little to
      create real economic development in the regions, so exacerbating the
      problems of welfare dependency.

      > Well yes if you call the South East of Enland & Edingburgh tiny parts of the country when in fact they are the major population centres in England and Scotland. The rest is utterly nonsense and non sequirors. Economic development in other regions is driven through the tax receipts from banking but how can “overheating” in London stop economic development in say Cornwall..its contributes through increased tax revenue that the government then redistributes (look at Labour in office) through its system of block regional grants and public sector subsidy. It’s why the public spending per head in London is much lower than say Newcastle. You are suggesting “crowding out” (look it up) which is nonsense. Exacerbating welfare dependency is a non sequitor.

      We saw how vulnerable it made our economy during the recession – which was deeper than in most countries.
      > Er yes this was because Labour had become highly dependant on the tax revenues from the financial sector for its spending programmes and believed the PR of “no return to boom n bust”…when the inevitable bust happened and the volitile finance tax revenues disappeared they were screwed so just borrowed the money to plug the spending gap hence the huge debt overhang we have…cheers Gordon..not.

      We saw how vulnerable it made our economy during the recession – which was deeper than in most countries.

      > In what way? Our recovery is faltering beacuse the pathetic Cameron won’t enact the supply side reforms and tax cuts necessary. He’s afraid of the BBC/Guardian axis of evil.

      >Once again our exporters are saddled with a high pound, thanks again largely to the financial services sector I believe.

      Nonsense it’s beacuse of the collapse in value of the Euro.

      It will be interesting to see how the experiment works out in France.

      > Yes but realise that France doesn’t really have a financial services industry anything like the scale in the UK or US. BNP, Credit Ag and SogGen are actually pretty small, c*appy regional banks with horror stories on their balance sheets. It’s not a valid comparison with the UK. For example most of BNPs and SocGens cash equities flow is booked in London and virtually all derivaties contracts.

      • Daniel Maris

        Fisk? Don’t make me laugh.
        As already pointed out, NEETS pre-dated the minimum wage.
        I don’t know why you want to tie our economic fate to a sector that nearly destroyed us. Finance is a will-o’- the-wisp – it can disappear in a trice.
        Is it a coincidence that we have more immigrants than UK nationals taking news jobs and we have the largest financial sector in Europe?

        No one really knows what the cost-benefit analysis is in terms of the financial sector. I think once you add in the amount of foreign workers, the effect on housing costs, the impact on infrastructure and the damage to manufacturing, and the bank bail outs, it’s not the positive that corporation tax returns suggest it is.
        As for France, I meant the broader French anti-austerity experiment – because if it succeeds, that’s the end of this UK government.

  • David Lindsay

    A day into the Robin Hood Tax in a G8 country, and has the sky fallen in?

    Well, there you are, then.

    • fubar_saunders

      Wait and see. Sweden had it for the best part of ten years. Expecting it to have catastrophic effects on day1 is naive in the extreme….

  • Nick Leaton

    Just shows what idiots journalists are.

    Stamp duty on share trades are a financial transaction tax.

    Let the politicians be brave. Put a transaction tax on ATM withdrawals.

  • Daniel Maris

    Yes, George Osborne has such a wonderful record of being right, doesn’t he?

  • tele_machus

    So, help me out
    If we tax at 0.5% already why should folk avoid France for a measly 0.2%
    Am I dim?

    • UlyssesReturns

      Yes

      • Andy

        Quite

    • mcclane

      Yes

    • Clarissa_Tan

      Hello, I should have been clearer – France’s new financial transactions tax on equities is meant as a precursor to a slew of such taxes on bonds and derivatives; in short, all kinds of transactions. Britain’s stamp duty on share trading has itself been criticised for distorting the market; it’s been cited as the kind of levy the UK should avoid: http://specc.ie/OsOYvq. Thanks for your comment.

      • Mike Brighton

        Yes of course it’s a FTT (Financial Transactions Tax) or “Tobin” tax after the (in)famous economist i.e. it’s a tax on the trading of financial instruments levied as a teasingly small % of contract…very appealing to the financially ignorant but lefty politicians looking yet another seemingly free lunch but who will rapidly discover the lunch is very very expensive for the economy as a whole. It’s didn’t work out that well in Sweden…..

      • tele_machus

        Thankyou Clarissa

        • telemacharse

          Polite but dim.

      • James

        Work I did some years ago shows that eliminating stamp duty on shares would give every pensioner on average wages and extra £1200 per year through thier entire retirement, and that the extra tax raised as a result would pay for the elimination of SDRT in something like 5 years. The Treasury objected as they would loose 5 years of tax, a bill that was in line with what we have spent on the Olympics.

    • Mike Brighton

      Very dim and clearly do not understand the equities and derivatives markets. A tobin tax will raise precisely zero point zero in revenues. I can’t see the Germans having a tobin tax on precision engineering and car manufacturing nor the French on aerospace components and fine wines so why should we tax our largest industry and funnel all the money to a totally undemocratic and corrupt EU? Screw ’em

      • tele_machus

        Mike dear patronising child-Clarissa has pointed me to understanding
        In fact my point was valid-until the thick end of the wedge comes into view
        *
        “Stamp duty has deformed the market in the UK, with people buying more derivatives instead of stocks’, explained Pierre-Yves Gauthier, head of strategy at research firm AlphaValue. ‘The example coming from the UK shows us that this sort of tax makes the market more dangerous’.”

    • Nicholas

      You are the dummy who puts the dim in Dimoto.

    • Noa

      and then sum

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