French President Nicolas Sarkozy has made it quite clear he is determined to forge ahead with a controvesial Financial Transactions Tax (FTT), even if it means his country is the only one to implement it. It seems likely, then, that some form of FTT will be introduced in 2012, though it remains to be seen whether such a tax will be at the level of the EU, the Eurozone, the new “Eurozone Plus” group… or just France. The European Commission has been pushing for an eventual EU-wide tax, and its proposal (PDF) was presented to European finance ministers last year by Tax Commissioner Algirdas Šemeta. Debating Europe launched a debate on the FTT in 2011, and we’ve taken some of the comments and questions from that debate to Commissioner Šemeta to hear his response.
First, we had a comment from blogger Tim Worstall, who argued that financial institutions will just end up passing down the costs of any FTT to consumers. How does the Commissioner respond?
It is important to be clear on the scope of the proposed FTT. We want to tax the trading of financial instruments like securities, bonds and derivatives, not the day-to-day financial activities of ordinary citizens or companies. The conclusion of insurance contracts, mortgage lending, consumer and business credits or payment services will, for example, not be included in the scope of this tax. More than 85% of all the transactions to be taxed are transactions within the financial sector, where, for example, one bank trades with another one. So, there is no direct client immediately identifiable to whom the banks might want to pass on the tax incurred.
Thus, citizens, private households and SMEs will not be directly affected by the tax, unless they themselves invest on financial markets. However, they might be indirectly affected by an increase in capital costs and lower financial asset prices in case financial institutions want to recover the cost of the tax from business with their clients not linked to financial markets. But these effects will probably be limited as the tax rate proposed is low and would in the first place fall on financial companies. Even if the bank was to pass on the FTT to its client, such as a private household, the additional charge would be rather low. In case a private household was to intervene on financial markets, for example through buying or selling shares, it should only be charged an additional 0.01 to 0.1% of the transaction volume. If a private household wanted to purchase, for example, shares in the amount of €10,000 his bank might charge a €10 FTT for this transaction. Of course, the more frequently a person traded (with the help of his bank) on stock exchanges, the more frequently the investor would have to pay the tax.
It is, indeed, expected that the shareholders of the banks and the investment bankers will have to shoulder parts of the tax, for example through lower dividend payments and reduced bonuses paid out. This effect would not be unwarranted, as a golden rule of sound public policy requires that those benefiting from a public policy should also be those that should pay for its provision.
Next, we had a comment from Jeremy Baxter, who argued that introducing an FTT would just encourage financial institutions to move their operations elsewhere, such as Zurich, where there was less regulation and they could avoid paying.
The FTT proposal should be seen as a key step to making progress on a global solution to taxing financial transactions. A global FTT is the first best solution. The Commission has always been in favour of an FTT at the global level and we think that it would make sense to support this position by leading by example.
We believe that if we can show that such a tax works also at a (sufficiently broadly defined) regional level and generates substantial revenue without harming the overall economic development, then other regions of the world will follow. However, any “local” FTT needs a number of anti-avoidance and anti-relocation measures. We want to set a good example to promote the FTT at the global level – as has been asked from us by the European Parliament and the heads of state of the EU Member States. The Commission is not the only one to advocate this idea – there were many supporters at the Millennium Development Summit in NYC recently, for example, but it is true that there is no universal consensus.
We will continue discussing this with our G20 partners. I think the sounder, more solid the evidence of the potential benefits of such a tax we can provide, the greater our chances are of convincing them to work with us on a global FTT.
Nevertheless, already with the legal proposal of the Commission there are a lot of potential loopholes that have been closed. Actually, relocating a transaction (for example, from Frankfurt to Zurich) does not really help in circumventing the payment of the tax, as it is not the place where the transaction takes place that determines tax liability but the place of establishment of the parties in the transaction.
John Raven argued that “It is important to consider the experience of Sweden in the late 1980s. The imposition of a FTT on equities and bonds was a total disaster as trading simply moved overseas. Bond trading collapsed, with implications for [government] financing.” Should the experience of Sweden be a warning against introducing an FTT?
Sweden introduced a 50 basis points tax on the purchase or sale of equity securities in January 1984. A “round trip” transaction (purchase and sale) resulted therefore in a 100 basis points tax. The tax applied to all equity security trades in Sweden using local brokerage services as well as to stock options. The fact that only local brokerage services were taxed is, in the literature, seen as the main design problem of the Swedish system.
We studied different countries’ experiences and we designed the tax carefully to avoid the kind of failure Sweden experienced. The Commission’s proposal includes in particular the following features:
• It has a much broader tax base;
• It makes a link to the residence of financial institutions at EU level;
• It considers financial institutions of third countries with a branch established in the EU or even without such a branch, i.e. makes them taxable; in the latter case when they interact with EU counterparties (subject to certain conditions).
To put it in other words: Sweden covered local brokerage services whereas the EU FTT would cover transactions by broadly defined financial institutions established in the EU, including pure third country-based institutions when they interact with EU counterparties. In case of the EU FTT, an easy evasion is not possible if there is a link with the EU territory. Joint and several liability rules ensure enforceability.
In addition, a possible move from equity trades to other financial instruments would not be an option under the EU FTT as financial instruments are comprehensively covered.Moreover, an EU framework provides for a coordinated approach in the EU which should mitigate the problem of relocation and distortion of competition.
Finally, Tim Worstall also argued against the tax on the grounds that “There will be no additional revenue! A bit comes in from the tax, yes, but it shrinks EU GDP by 1.7%. Meaning that all other tax revenues *fall*. By more than the new revenue. The FTT simply does not provide any extra revenues at all: it shrinks revenues.”
The Commission’s extensive analysis show that the implementation of an FTT at EU level, provided that the negative impacts of major risks identified would be minimized, could raise around €50 billion per year, largely depending on market reactions. Also, in case the profits of financial institutions were negatively affected, some offsetting knock-on effects on profit taxes could be expected. The tax will, thus, help to generate revenues for the public budget which could be used for different purposes.
There is indeed a degree of uncertainty on the revenue from an FTT, because it would be a new and innovative tax, and as asset prices underlying these transactions are volatile. This mainly holds for shares and derivatives thereof. Hopefully, also the market volumes for government bonds should decline once budget consolidation progresses. This risk can be managed by using cautious projections for the budget.
When it comes to estimating the effects of such a tax on GDP, a lot of uncertainty exists as well. The figure of 1.7% refers to a deviation of GDP from its baseline scenario in the long run. Thus, it describes a cumulative effect over several decades, while the revenue estimations provided refer to annual revenues. Also, some of the assumptions underlying the concrete model run (such as the design of the tax and the way how enterprises finance their investment activities or how the revenues generated will be recycled) introduced a significant bias in the estimation. Correcting for these effects, the more appropriate figure might therefore be in the order of 0.5 to 1.0%. In any case, we should not forget that such figures are derived from macroeconomic model simulations which are specifically difficult when it comes to analysing financial markets.
What do YOU think? Are you satisfied with Commissioner Šemeta’s arguments? Do you think countries like the UK (one of the most important financial centres in the world) will be able to avoid the FTT? Or do you support the tax as a way to “make the financial sector pay”? And what should be done with any revenues raised? Do they go to the Commission, to national governments or to help the world’s poor, as anti-poverty campaigners would like? Let us know in the form below, and we’ll take your comments to policy-makers and experts for their reactions.
34 comments Post a commentcomment
No. It is being hurt because there are no rules…
Definitely not!!On the contrary , this may have a positive effect, depending on other policies , that could be implemented!!!!
It is not normal that the ones who make the biggest quantities of money to not pay anything in the crisis. Finally they are the ones that are the source of the crisis. We are living in a globalism world, with too big corporations, with too much money in too few hands. It’s not right because it is ECONOMICAL DICTATORSHIP/EXTREMISM. It is exactly the opposite of communism. In communism there is no property at all. Now we are confronting with too big properties/owners. The dimension of corporations must be limited and a way of doing this thing is to tax more especially some services that do not require big corporations. We maybe need big factories because they can obtain better technology, but we don’t need such big banks and traders. Banks and traders must be a tool in economy but not the economy itself.
Depends on how the financial sector is allowed to react to a financial tax. If they are allowed to pass it directly onto consumers, then that would only result in an extra tax on the general public. A public where savers at the moment are looking at near 0% interest on their savings and if this tax is passed on, then savers will be looking at negative interest, in other words, paying banks a fee to provide an account. Given that all payments, regardless of source, must be paid into a financial institution, citizens are already trapped within the mafia styled bankster’s system. The proceeds of ALL transactions already makes its merry way to the top of this pyramid system, to the godfathers. The ideology of the EU also needs to be changed, to one that does NOT recognise that the mafia financial system or that the markets are our masters, that IF there is a place for them in society, they would exist to serve the people and only the people. Unfortunately, as I see it, the EU (and its member nations) have the same attitude as this mafia style of capitalism, that we are there to serve them, to be their slaves. This also needs to change and THIS is the most central and urgent issue…pj
I feel that the Tobin tax and other EU controls of the financial sector could cause a rift that ends up with Britain leaving the EU. From Europe’s view this might be a good thing. From my own viewpoint, as a pro-EU British citizen, the very thought depresses me.
The UK
The City of London is very successful as the UK regulation of the financial sector is very lenient and the enforcement very weak.
In recent months a scandal has grown as it has become very clear that quite a few large corporations have been let off billions of pounds of income tax.
Last year our Chancellor, (Minister of Finance), George Osborne, concluded a deal with Switzerland, where the Swiss would collect some tax for the British government, but in reality the agreement allows the rich and large corporations to continue to hide their money, but using more subtle techniques.
The deal with Switzerland effectively blocked EU plans to tighten up the control of Switzerland and other tax havens, around a third of which are British Protectorates, which could be shut down or controlled more effectively within a few weeks if our government really wanted.
However, the lax control, the informal relationships, the links to tax havens allow a lot of money from dubious sources flow through London rather than the better regulated financial centres of say Frankfurt or New York.
The City, our government, the top of our civil service are intertwined though our class system, informal clubs and guilds, private schooling etc. Financiers and bankers are therefore able to get their views across easily through meetings, charity events and dinner parties.
David Cameron’s childish tantrum and veto at last year’s euro summit was because he, and Osborne, and many of the government see the City as the most important factor in the British economy and although they won’t admit it they would also see it as a very lucrative post political career path.
What I am really saying
Is that the EU must totally ignore the UK viewpoint when discussing the financial sector as we will deliberately bring any proposal down.
Personally I think a financial transaction tax will work, providing that there is a fair agreement by the majority of EU countries.
I believe it will cause some dealers and some transactions to move away, but most of these will be the highly speculative casino-style bets on derivatives or bundles of debt bet on whether a bundle of derivatives goes up or down. These are the games that brought on the 2008 financial crisis.
In the short term we will lose some of the speculators but we also gain stability and a little of the money that the taxpayers have paid out to support bankers in their time of need.
Unfortunately the UK will not play their part. They will argue that we have to wait until the entire agrees – knowing, of course, that the whole world will never agree.
Depends on how the financial sector is allowed to react to a financial tax. If they are allowed to pass it directly onto consumers, then that would only result in an extra tax on the general public. A public where savers at the moment are looking at near 0% interest on their savings and if this tax is passed on, then savers will be looking at negative interest, in other words, paying banks a fee to provide an account. Although I note that the proposer says this will not happen. Given that all payments, regardless of source, must be paid into a financial institution, citizens are already trapped within the mafia styled bankster’s system. The proceeds of ALL transactions already makes its merry way to the top of this pyramid system, to the godfathers. The ideology of the EU also needs to be changed, to one that does NOT recognise that the mafia financial system or that the markets are our masters, that IF there is a place for them in society, they would exist to serve the people and only the people. Unfortunately, as I see it, the EU (and its member nations) have the same attitude as this mafia style of capitalism, that we are there to serve them, to be their slaves. This also needs to change and THIS is the most central and urgent issue. The current dominant ideology was, is and always will be, anti-human, anti-people. If you support this mafia capitalist system, you should stop whining, the system is doing what it is designed to do. If you do not support it say so, at every opportunity and call for its abolition…..pj
Well, it would be nice if we had a commissioner for taxation who actually understood taxation. But given that this is the European Union we’ll have to deal with what we’ve got I guess.
That we’ve a tax commissioner who learnt his economics under Soviet rule doesn’t inspire confidence to be honest.
“So, there is no direct client immediately identifiable to whom the banks might want to pass on the tax incurred.”
This is not what tax incidence means. We are not saying that banks will pass on the tax. We are saying that the tax will change behaviour so that the burden falls elsewhere.
For example, one of the aims of the tax is to reduce liquidity. OK, that’s fine: but reduced liqudity in markets leads to wider spreads in markets. This follows like night does day. Which then means that all transactions which go through the financial markets are paying these wider spreads.
That’s not a tax, note, it’s an effect of the tax. So, everyone who buys anything that has been manufactured with the aid of the financial system (ie, everybody and everything) is paying those wider spreads and is thus paying more as a result of the tax.
In fact, it’s trivially easy to show that those higher spreads will, in times and places, be higher than the revenue raised from the tax. Thus the incidence is greater than 100%. Which makes it a stinkingly bad tax really.
“However, they might be indirectly affected by an increase in capital costs and lower financial asset prices”
This is in fact what your own report says. It’s exactly where we get the 1.76% from. The lower asset prices/increase in capital costs lead to this shrinking of the economy from where it would have been without the tax.
This is *your* analysis remember.
“The figure of 1.7% refers to a deviation of GDP from its baseline scenario in the long run. Thus, it describes a cumulative effect over several decades, while the revenue estimations provided refer to annual revenues.”
Err, yes, and so? Or did that soviet economics course blind you to the obvious?
“Also, some of the assumptions underlying the concrete model run (such as the design of the tax and the way how enterprises finance their investment activities or how the revenues generated will be recycled) introduced a significant bias in the estimation. Correcting for these effects, the more appropriate figure might therefore be in the order of 0.5 to 1.0%.”
Err, no. The 1.76% was your median assumption. Your bad one was 3.5%. And if there are all these unknowns lying around then I can just pull a figure from the air as you are doing, no? How does 5% sound? I’ve as much justification for that as you have of 0.5%.
But OK, now let us take your number of 1%. I’m feeling generous. And even your 50 billion figure (which is much hoigher than your report actually says). What is 50 billion as a percentage of EU GDP? About 0.4% or so isn’t it?
So, in order to gain 0.4% of GDP in tax revenues we are going to impose a tax which shrinks GDP by 1%. The big question is, is this a good idea?
To answer this , at one level, we’ve got to work out what is the amount of any increase in GDP that goes in tax. Not known exactly but we can work it out from first principles. Average taxation in EU countries is 40-50% of GDP. Marginal rates will of course be higher than this because of the various tax thresholds.
So, we can assuredly say that 50% of an increase in GDP, of that marginal increase, ends up as tax.
Excellent. So, we’ve now an economy which is 1% smaller than it would have been without the tax. If we had this 1`% of GDP instead of the tax then we would have 0.5% of GDP in tax revenues.
However, we do have the tax, we do not have the 1% of GDP nor the 0.5% of GDP in tax. What we have instead is the 0.4% of GDP in revenues from the new tax.
That is, the tax has brought about a reduction in tax revenues. Which is what I said at the beginning.
And note, that 1% of GDP that does not exist, that’s the tax incidence. Everyone is poorer because the tax exists.
“The figure of 1.7% refers to a deviation of GDP from its baseline scenario in the long run. Thus, it describes a cumulative effect over several decades, while the revenue estimations provided refer to annual revenues.”
Blimey, are you being stupid here or lying?
GDP is an annual measure. Thus we lose this 1.76% of GDP each and every year.
The report is not saying that in 100 years time GDP will be, for one year, 1.76% less than it would otherwise have been. It’s saying that GDP every year will be 1.76% lower than it would otherwise have been.
We might also point to Diamond and Mirrlees….they did win their Nobels for their studies of taxation after all. You just don#’t want to tax intermdiate inouts if any other method is available to you. Taxing transactions in the financial markets really is taxing intermediate transactions. There are other methods of taxing this sector available: and FAT for example, of perhaps ending the various VAT exemptions.
The FTT is simply a very bad way of doing anythng at all.
For, as I’ve said, It won’t raise any tax revenue, it will reduce total revenues, for while we will see the revenues directly from the tax we won’t see the revenues which do not come from the smaller economy. And more than that, the incidence, the cost to everyone, will be higher than even the revenues that we can see.
Look, if I came along and said “I’ve a great idea for a new tax! It’ll make everyone poorer and we won’t get any tax revenues from it either!”. You’d send for the men in white coats and have me locked up.
So why is it that you’re not all being put in the looney bin for being so stupid as to make the same suggestion?
Or is Berlaymont simply the French for Bedlam?
“Or do you support the tax as a way to “make the financial sector pay”?”
That was my initial reaction to that, and my initial position. Now that the Commissioner clarified a few more points I do not think I have any doubts anymore..
“And what should be done with any revenues raised?”
Use them to erase and pay off any debts from debt ridden countries?
Do you think countries like the UK (one of the most important financial centres in the world) will be able to avoid the FTT?
They should not..Enough with this elitism.. Elite countries, elite nations, elite people, elite clubs, elite institutions. For some countries or people to be so rich, others must be very poor..There is no other way..So enough with tax havens and financial centers of the world..Some countries are only separate states from other nations just to serve the role of tax haven for the rich, while the rest of us are trapped and pay their share! (San Marino from Italy, Monaco from France, Liechtenstein from Switzerland, ect).
What those countries are actually doing, is to contribute to the crime of forcing some countries, nations or people to be super poor, while others are super rich..Contribute to the global inequality.. The sole role of their existence is to be a safe haven for the money that is stolen at some cases from the people..It is well known that many African leaders have bank accounts in Switzerland, while their people are starving and they demand aid from the rich countries.
It is well known that the Greek corrupt elite has money hidden there as well, while the people are asked to swallow tough austerity measures..So Switzerland is a part of this crime, either they like it or not!! (Nothing against the lovely Swiss as a nation or culture, but fair is fair…Sorry!)..
In a similar way, Britain plays its part in this Matrix of financial games and inequality, as they are “one of the most important financial centers in the world”..So they should own up to it and start playing fair…No, their wealth is not down to the “greatness” of their country (no matter how much I love it), rather their position and role as one of the countries that the world is divided in rich and poor and the financiers are allowed uncontrollably to play their games making money mainly for themselves, while nations are regarded as private corporations that can be driven to bankruptcy…Shame!!
Lets start with the obvious issues. This tax is supposed to be a Tobin tax, it is not because as people who have read his proposal know it is supposed to be for global transactions in order to give the money to the underdeveloped nations. Up to now the only thing we hear is that the EU, and Mr Sarkozy most of everyone, want to impose this tax. There is no inclination for anyone else, because most of the growth on the developed countries is going to be anemic for some years.
The answer in the Sweden paradigm is scarer: the problem was not the tax but its implementation, it is like saying: the problem with the person that tried to commit suicide was not their desicion but that the knife was not too sharp… This time we will make it so sharp that they will be sure that there is going to be bleeding for many places in their body…
What about the transferring effects to the consumers? It is not for the day-to-day transaction but only when someone wants to buy bonds or equities, another disadvantage to the individual who wants to participate in the markets.
They indirect costs is consider to be limited because in the first place will fall to the financial institutions: right now EU banks are in a detriment position; the rumours say that they lent their gold in order to be financed, apart from payning an interest, add the Basell II and III and it is not hard for someone to consider that right now nost of the indirect costs will be transfered to the consumer. For the observation that it will take time to be fully implemented I have to say that EU banks in particular will be for many years in their current position.
Last, but not least, the two most important issues. Some people consider, and it can also be derived from Commisioner words, that this is the price paying for banks’ public support. I will not try to say much about the fact that the banks that had the support have been hurt and will continue to do so through they rock-bottom prices, that they are not going to increase any time soon, or through the fact that most of the times they do not pay any divident until they give back their aid (if that is not the case and the bosses of those banks also get big bonuses like the ones that they have not been aided, which is totally unfair, people have to complain to banks’ new owners: their political leaders).
The problem is more serious: instead of punishing the persons who were resposible for the credit mess, most of them have not been punished, they try to punish the companies that they left behind! Is that justice?! I guess it is a nice political play by the EU leaders, some of them face elections soon, to show that they do something about the austerity that they have imposed to their electorates… Where these tax amounts will go is also a very interesting thing; I really hope a special purpose fund to be created, for example about infrastructure in EU countries.
“For some countries or people to be so rich, others must be very poor..There is no other way”
Dear God, such howling ignorance. Have you considered the idea that perhaps the economy is not a zero sum game?
No?
You haven’t?
Then would you like to go and do so and while you do the adults will continue their conversation?
Jeebus, rampant nonsense stupidity…..
“In recent months a scandal has grown as it has become very clear that quite a few large corporations have been let off billions of pounds of income tax. ”
B*******. N**** B** T***.
Look, the Vodafone thing. It was all about which law is more powerfull, EU law about the freedom of establishment, or UK law about controlled foreign companies.
As it actually turns out, EU law trumps UK law on such matters.
“I feel that the Tobin tax and other EU controls of the financial sector could cause a rift that ends up with Britain leaving the EU. From Europe’s view this might be a good thing. From my own viewpoint, as a pro-EU British citizen, the very thought depresses me. ”
The only way the UK could get that fabled £6 billion out of Vodafone is if the UK left the EU. Because then UK law would be more important than EU.
Christe, are people really this stupid?
Comment edited by a moderator on 11/01/12 for language.
@Tim Worstall
If you believe the judicious use of insults is going to help your argumentation, I’m not sure that works. Attacking someone’s authority based on being educated in the Soviet Union is on several fronts a rather poor decision – first, it depicts arrogance and spite for circumstances not under that person’s control without demonstrating any actual relevance for the issue at hand. If you want to attack someone’s authority, do it on the substance. If you can’t do that, it is doubtful that you’re qualified to attack his authority to begin with.
Second, western educated economists did not exactly demonstrate their credibility and proficiency given the situation their economies are in.
Lastly, since ancient times, the basic tenet of proper academic conduct has been “sine ira et studio” – without wrath or bias. If you want to attack someone’s academic credentials while failing the most basic standards, I’m afraid the authority that’s at stake is your own.
If you want to make a point, make a point. Making statements such as “Then would you like to go and do so and while you do the adults will continue their conversation?” while your own conduct is hardly characterizable as adult behaviour and more on par with a schoolyard argument only underscores that you quite probably don’t believe your own position to be half as strong as you try hard to pretend it is. Otherwise, you wouldn’t deem such attacks necessary.
Tim, are you considering yourself an adult with your reaction to my post? Go figure….
Some countries have more than they should..Some countries are not allowed to grow and prosper..That is a fact..Under what criteria an economy is considered by the economists not fit to invest in, under what criteria countries keep their AAA, under what criteria countries that have oil are poor, while others are rich, under what criteria countries that do have oil are not exploiting it..??
Please explain it to us since you are so mature an adult in here…!!
Sorry for getting in your nose..Truth annoys some it seems….
One way for Europe to regain control from international financial hostile ‘competitors’ is for EU member nations to reintroduce their own currencies, for local purposes. Keep the Euro for cross border and EU international trading purposes. Meaning all external trade will be in Euros. Each member nation’s currency will have a different value to the Euro but it will allow each nation, to play around with their own currencies and internal economies according to their ideologies, without undermining the EU as a whole. This situation would be the best of both worlds and of course, draw a line in the sand, around Europe. The $US can do as it likes. In my opinion, this is how the EU should have proceeded from the start and then eventually, in about 100 years time :) maybe, just maybe go all Euro if the situation becomes more civilized and mature.
Oliver I was not educated in the Soviet Union…( I do not know if you meant this as an insult, but anyway)..Yes I do not agree with this “system”..I am not totally against capitalism..I agree with it up to a point, as the base of the economic model that we should be using..But definitely WITH regulation!! I am a socialist, I can not help it..Sorry!!
We have seen what unregulated Banks and Markets can do..I am simply one of the 99% on this planet..No I am not an economist ( and I am glad I am not, as being an economist or a banker nowdays is similar to being a thief) but it is no brainer to see that this “system” is not working, not for us, the ordinary tax payers…Perhaps it works for you and Mr Worstall..It doesn’t for me though…So I want reforms..If that annoys some, then tough…!!
“Oliver I was not educated in the Soviet Union…( I do not know if you meant this as an insult, but anyway)..”
Actually, Tim meant this as an insult, and not against you but against Commissioner Algirdas Šemeta.
Thanx for the clarification…
If you believe the judicious use of insults is going to help your argumentation,
This is not academia, this is politics. Insults, bile, these are part and parcel of the game.
And what am I supposed to be like when I see the entire European political class doing something crassly stupid? Just shrug my shoulders and say “c’est la vie”?
Or do what I am doing and try and beat some sense into them?
The FTT is bad tax. It won’t rise any extra revenue and it will cause the EU economy to shrink. If you want to make the banks pay more then there are better alternatives, an FAT perhaps.
And how am I supposed to get thes points over to our deal Commissioner of Taxation if not by shouting insults at him?
It’s not as if I’ve been able to vote for him is it. Nor against him, the usual way we infleunce politics in a democracy.
“This is not academia, this is politics. Insults, bile, these are part and parcel of the game.”
Hardly. While there are a handful of parliaments where even fists will fly, in most parlaments your language would get you censored.
“And what am I supposed to be like when I see the entire European political class doing something crassly stupid? Just shrug my shoulders and say “c’est la vie”?”
A)Just because you consider something stupid doesn’t necessarily mean that it actually is so.
B)There are plenty of other things to do.
“And how am I supposed to get thes points over to our deal Commissioner of Taxation if not by shouting insults at him?”
If you believe you will get it across to him by shouting insults, you underscore the point about adult conduct.
Dear all,
Please keep it civil. This is an important debate: the FTT is very likely (in some form) now going to become a reality in at least one European country. We want to hear your arguments for / against it so we can bring them up with some of the people responsible for the new tax. However, that means we need you to respect one another and put forward your arguments without ad hominem attacks. This goes for everyone.
@Tim – We appreciate your input on the economic reasons against introducing an FTT, but you will need to watch your language. We’re all adults, so we encourage a lively debate – but please keep it clean.
“but you will need to watch your language. We’re all adults, so we encourage a lively debate – but please keep it clean.”
This is me being clean. My more normal mode of expression is a great deal more Anglo Saxon than this.
Tim will you please explain to us why Africa, a region of the world that is richer than any other in natural resources, is actually the poorest continent? Why the northern European states are the richer, when they have very few natural resources? is it only down to the “corruption” they are plagued by?
When Sweden actually cooperated with the Nazis, while the rest of us were being slaughtered to free Europe from their grip, when Switzerland was not even invaded by them and even the Nazis used them as a safe haven to hide the stolen gold of the European Jews (sorry it had to be said-i wonder whatever happened to this gold), do you still think that this system of gambling is the right one?
Because it is gambling? set up by gamblers! the Americans and their culture of easy money! Who controls the markets, the IMF and the rating agencies? The gamblers of the west! Just watch any western movie and see what their favorite pass time was back then, and what is today! Gambling! and you support this type of economy?
Why Greece is not allowed to prosper by this system, while it has much more natural resources from the northern states? Gold, uranium, natural gas, oil..Plus a perfect climate, a beautiful landscape, and a important geopolitical position! is it wrong to assume that there are some lobbies both inside and outside the country are forbidding and prosperity? The gamblers of the west and of course our own traitors? the Greek orthodox church, a corrupt establishment that i despise, our corrupt elite that was established with money coming from the west, and the rich elite made by a handful of people…
but why didn’t Greece prospered all those years..??is it wrong to assume that in all those “summits” that we are not allowed to watch what is being discussed by our leaders, or what deals are being made, the future of each country and balance of power is being discussed?
with money from Europe Greece has now a powerful farming lobby that is not allowing any real change in the country’s economy…while if you look at the map, Greece is a mountainous country with very few patches of green, mainly found in Thessaly, Macedonia and Thrace…our islands are mostly bare rocks sticking out of the sea…
wouldn’t be wise for Greece to exploit its other natural resources , like the oil and natural gas, and provide Europe not just olives and tomatoes? In fact what i support as a future economic model is NOT the gambling culture of the market economy of the yanks that you support..!!
rather a federal Europe that invests in every country and allows it to exploit its natural resources first for jobs, stability, progress and prosperity of its own people, and then to supply the continent with the best of what each country can provide…fish from the north, vegetables from the south, minerals from Greece, agriculture from other greener spots of the continent..
look at the European map and see which countries are greener…?? France, Poland, Ukraine….We should be forwarding CAP funds over there and make them the breadbasket of Europe…Greece can still produce only what other regions can not produce because of climatic restrictions…then it can provide Europe with its mineral resources, wind mills, solar panels for energy..oil, gas, gold, uranium…set up a green renewable industry, instead of remaining a limping farming country..we can not compete with France as we do not have as much land mass that can be farmed as over there…Poland and Ukraine(that i hope will join in the future) and other regions like Romania, Hungary etc should start receiving more CAP funds and become the bread basket of Europe….They have vast farm lands….
Why is Greece condemned to remain a poor farming country? while we have so much potential? perhaps because the farming lobby is too strong, like the fisheries lobby is too strong in Iceland and keep the country out of EU….and why don’t we change our economies…?? perhaps because people like you protest…
you are going to lose your easy money that comes from the gambling in the markets…you have created bubble economies in the former poor countries of Europe (Greece, Ireland, Spain and Portugal) only to drive them into huge indebtment and rush in for the kill once they start asking for bail outs…some are making huge profits out of the repayments of the loans that the poor people are forced to accept by the IMF..this is wrong!!
and you support all this nonsense? i want change! i want Europe to provide and protect its people…i want equality among its states, and investments where they are needed to exploit the continent’s natural resources for the betterment of the people first..stability, growth, peace and prosperity for all europeans, not just a bunch lazy few….
now answer all the above and show us how mature and adult you are…i am not an economist but if i can think of all the above then i am sure our politicians can do also..but why aren’t they doing anything about it? because they listen to people like you…go figure…!!
“Tim will you please explain to us why Africa, a region of the world that is richer than any other in natural resources, is actually the poorest continent? Why the northern European states are the richer, when they have very few natural resources?”
Because natural resources are not what make a place rich or poor. It is the productivity of the labour which does.
This is usually explained on about page three or perhaps page four of any of the standard economics textbooks. Might I suggest that you try reading one?
If you don’t like standard economics then perhaps you might like to try Marx…..he does point out after all that it is human labour that adds value.
Debating Europe is getting more and more interesting every day and I wish I could have enough time to read all the posted comments in any subject.
As far as this subject is concerned I do not agree with the application of the FTT. At least not yet. As I said before, we have to find a political solution first before we proceed to any financial (fund raising) policy. First because any fund raising policy needs a stable and a flexible political system to manage funds in such a way that it would be accepted by the tax-paying citizens and second, financial sector at the moment is trying to recover from a bad crisis and to re-orientate its presence. The worst part of it is that we do not know if we are at the end of this crisis. Are we?
In view of cautions above I’ll try & keep this comment polite but the latest comment from Mr Mouzeveris simply will not do. Greece is in crisis because, despite the billions of Euro’s that have poured into the country since it adopted the currency, since it joined the EU in truth, it still has very low rates of productivity. Too low to support the interest & repayments on its debt. If those amounts have been spent in ways that have not resulted in sufficient productivity, what makes you think that the introduction of an FTT is going to alter that situation? Harmful that it’s likely to be, it’s too tiny to have more than marginal effects on investment decisions. Or would you prefer that investors simply didn’t invest in Greece?
Must find a way to avoid the transfer of the tax to customers. It’s true that in a completely free economy it’s hard to solve this kind of problem. In my opinion we must find a way to limit the growth of financial empires. The society needs jobs and a better living but not necessarily huge private corporations. Can be smaller corporations. They were so until more or less 20 years ago and things went well. When the globalism stroked appeared the financial monsters that can fall and produces cataclysms in local and world wide economy.
To limit the growth of financial empires is needed taxation that will put limit to expansion. In the same time is needed a mechanism that will force the companies to not transfer the cost to customers. This is not applicable in the actual economy but I think must be considered.
Some renegate economists proposed to wipe out all debts in economy. The solution is not fair and the creditors will never accept it. The STABILO solution is more acceptable.
One of many possible solutions for the actual world economical crisis, can be a COMPLETELY STABLE CURRENCY. Why not ? If I work something my work have a value. If I want to store this value for 50 years for example, in the actual economical… system, I JUST CAN’T. It’s a human right to be able to STORE the VALUE of my work, for a long period of time, if I do not want to spend it right now.
Now the currency it’s used as ECONOMICAL INDICATOR and for evaluation of goods, transportation of the values and storing the values. So, the money of the population(THE VALUE OF THEIR WORK) are used AS INDICATOR for the economy, and if this indicator goes wrong, the money of the population will loose value. This is a stupid thing. We need a STABLE CURRENCY. There are other indicators that can be used. Not the money of the people. We must separate the INDICATORS of economy by the evaluating, store and transport of values.
The system is ALREADY TESTED IN ECUADOR. They are using US dollars. US dollars are COMPLETELY INDEPENDENT by the politics in Ecuador. If bankers from Ecuador are doing something wrong, the money of the population are FINE. But dollars are linked by US economy. If the economy of US goes wrong the Ecuadorians will lose the value.
So, the solution is that the STABLE MONEY to not be linked by one economy. They are like a BUS. You are using it, you solve your transportation problem, but IT NOT YOUR BUS.
You can’t sell it, destroy it etc. I think ECB must build THIS TYPE OF EURO/NEURO/STABILO currency.
A currency ready for international transactions WITHOUT A SPECIFIC NATIONALITY.
Tim I have read Marx…Many of my ideas come from there…Greece has a young, educated, multilingual youth that just sits there and works in hotels or restaurants, even though they have loads of degrees..Or the other option is to emigrate..so how you increase productivity? When you have everything you need to do it, you are just not doing it…and Pete if you read carefully my post, you will read that I am mentioning the misuse of of the EU funds by the Greek corrupt political elite..Then thing is, why did EU not do anything about it before hand..They knew about it, Juncker admitted it… So why did they turn the blind eye? Who did it suit to leave Greece go bankrupt? Think about it…
And Tim, how do you increase productivity when you are not allow to exploit your natural resources,thus exporting them, thus kick-starting your economy? Then invest this money to make and develop industries thus increase your productivity..?? Instead foreign companies come and steal your resources for scrap….Use your brain..Not just what you want to believe or read in your books…
If Nigeria was allowed to become Saudi Arabia or Norway, who would lose out and who would gain? Think about it..!! They have oil but their country is nothing like as the Arab states…Now do not waffle me nonsense again…Give me your opinion and support it with arguments….do you think that this system is fair..?? Because I do not…..
Also Tim, please do explain to me about productivity….Saudi Arabia, Kuweit and UAE…Arid lands with nothing else to produce but oil…There was nothing there before oil was found, and perhaps nothing still would not be there if oil was not found..Africa on the other hand has lots more..Minerals, fertile land, climate..Young people…Greece has the same, plus a geostrategic position.. UAE made lots of money because of its oil, then started investing in construction…There is nothing else over there..Yet they are filthy rich…No other productivity apart oil, and in recent years the property bubble, which of course is doomed to fail at some stage…So with oil, AND ONLY OIL, they became super rich and now they are comfortable enough to invest all this money in creating other types of economy, to explore and invest in other fields…Africa and Greece on the other hand were not given this privilege…By whose authority? Please explain it to me….Try again…Try harder…See where I am going with this…?
Everything said above, trimmed in one blog post…!
http://eblanademocraticmove.blogspot.com/2012/01/my-ideal-future-economic-model-for.html
Well, this debate on whether ta FTT would hurt the European economy has deteriorated to a shouting match, with occasional, preposterous assertions of omniscience. We all need the modesty to recognize that the FTT is a difficult issue, whose outcome, if applied, cannot be predicted with certainty. Invoking positions taken by Nobel Prize winners againts the FTT does not help: after all its first proponent, Professor Tobin, is a Nobel Prize winning economist too.
I think the time for an FTT has come, because our financial system has got out of control with the globalization of financial markets without a corresponding governance at world level. If we do not take substantial corrective measures, our international economic system and our very democracy are at risk. If we want to save the system, we have to change its governance.Neoclassical economists disagree, but they plaid a role in the current mess, and have no solution to the current crisis, which was provoked by irresponsible behaviour of key actors without the necessary restraining rules.
FTT is of course no solution to our current world financial predicament, but only one instrument among many. The subject of this debate is not what to do with other policies (economic, social, even financial or what have you), but whether there are reasons to introduce an FTT now or not. I will not repeat here what I wrote already in favour of such a tax, but more generally.
I worry about the unraveling of the post-war economic system introduced by the West after World War II, and in particular about the scandalous worsening of the income distribution, both in Western and other countries who have adopted the capitalist system (still better than any other system adopted so far by man). The increasing sequestration of additional income by 1% (and even more by 0.1%) of the population, and the shrinking of the middle-class in industrialized countries is also a moral problem that needs to be tackled before it leads to destructive revolutionary events.
Keynes warned against liberalizing capital movements and preached for action by both surplus and deficit countries on current account to achieve a reasonable balance. It may be impossible to put the genie back into the bottle. But the uncontrollable expansion of international capital movements and their speculative short-termism and tremendous volatility provide unsustainable instability and insecurity. For a time they have maximized liquidity, but financial turmoil has now created serious problems even in that respect, particularly for the less fortunate.
A FTT enjoys growing support by those who do not have the means to speculate, and watch what the super-rich do with their money, defeating the trickle-down theory that underpinned the Thatcher and Reagan revolutions. A FTT will be useful if it can somewhat discourage pure financial speculation and gather resources that can be used for reducing public indebtedness, financing the EU budget (paralyzed by the net contributor-net beneficiary debate), and possible help also the poorest of the poor at home and abroad.
The obstacles to such a tax are huge, because it is opposed by financial actors with fallacious arguments aimed at keeping a free hand to gather the highest profits (and asking to socialize losses when these occur). Considering what the tax payers have already paid to bail out failing banks, the discussion as to whether the costs of an FTT will be passed on to the consumers or not seems of secondary importance. I trust that this will be avoided as much as possible by closer regulations of banks as regards commissions, bonuses and the like. Consensus on a FTT is difficult to achieve at world level from the very beginning. But the EU with its market, the largest in the world, should start (We have done it with the Emission Trading Scheme, why not also with a FTT). I trust others, notably the hugely indebted USA, will have eventually no choice and follow. Any resulting negative effects of the FTT will have to be tackled with further legislation. The UK would be well advised to participate, because one cannot be a member of the Single European Market opting out on everything else related to it (the single currency, fiscal policy coordination, social policy etc). If the UK prefers to go it alone, it should be allowed to leave the whole enterprise and take care of itself in the global world. I doubts it would be to its advantage. For instance, it should be aware of the consequences, notably that the City may well move to Frankfurt, a true disaster for a country that, unlike Germany, has abandoned manufacturing for services.