Robin Hood Tax tug of war at the Barclays AGM (Photo credit: Robin Hood Tax)
Since the idea was first widely mooted in 2008, most of us have dismissed the Financial Transaction Tax (or Tobin Tax or Robin Hood Tax) as a wonderful idea that would not work due to the globalised nature of our financial services industry. Sweden introduced such a tax in the 1980s, and it crippled the nation’s financial services industry. Whilst a tax of 0.1% on the proceeds of any sale of shares, bonds and gilts sounds relatively insignificant, when one small country in a world of fluid capital attempts to impose it, that country becomes very uncompetitive (how I loathe the word- it is used as if a race to the bottom on tax rates is something nations should be taking up with gusto). If only it could be made to work, over £50 ($75) billion could be raised for EU governments. A similar sum would be raised in the US alone.
However, Britain has, thanks to the wisdom of Thatcher, Major and Blair, an economy dependent on financial services due to our lack of a strong industrial base. This is why I’m not surprised that our political leaders rejected an EU-wide FTT to fund EU spending, pointing out the convenience to our Continental partners that 80% of the revenues would come from Britain. I’m no friend of the bankers, but I see no point taxing them to our national disadvantage. Until we’ve rebalanced our economy (a long and expensive process that will take decades) we have to resist the temptation- and, I will freely admit, the moral pressure- to raise taxation way above the international standard.
But this does not mean we must abandon the idea of a FTT. Indeed, the policy only needs a little tweaking, which is what is happening now. 11 European states are working on an agreement to impose the tax within two years, creating a much more essential market for investment banks than Sweden’s lone market. Crucially, the revenue will be retained by the respective nation states. In this way, they are testing the waters on behalf of Britain, the US and perhaps Japan.
I propose that Britain signs up only when the United States agrees to. In a time when increased tax receipts are badly needed by governments struggling with stubborn budget deficits, I doubt the Obama administration would need much persuasion- particularly when there are moves towards an EU-US, or “Atlantic” Free Trade Zone. Perhaps with the co-ordination of action by the governments of 800 million people, 45% of the global economy and the largest centres of scientific and economic innovation in the world, we have a hope of protecting our current standard of living against the demands of competition with slave labor in China, low tax rates in the Cayman Islands, a lack of regulation in poor African states, and all the insecurity that is created by their poverty.
If we want to improve the prospects of the peoples of the developed and developing nations, we need smart governments that reject the exploitation of cheap labor in the Third World and consumers in the First by corporate interests. Their cherrypicking will, left unchecked, threaten us all.
