Stephen Doughty looks back at a week that has highlighted the redistribution potential of a levy on financial transactions

May 24th, 2012

This has been a big week for a small tax. The Robin Hood tax international week of action has put the idea well and truly on the global map. Major developments have taken place in the USA and yesterday the European Parliament voted in it’s favour with a huge majority. For those who haven’t heard, it’s known as the Robin Hood tax because, literally it takes from the rich – in this case banks and investment firms – and gives to the poor.

It is a tiny tax because it is less than half of 1 per cent on financial transactions. It may be tiny but it could raise huge sums, running to £billions. Conceptually similar to the Tobin tax, it would affect a wider range of asset classes including the purchase and sale of stocks, bonds, commodities, unit trusts, mutual funds, and derivatives such as futures and options. The Tobin tax was proposed for foreign currency exchange only.

A UK based global campaign for the Robin Hood tax was launched in February 2010 and is being run by a coalition of over 50 charities and organizations, including Oxfam, Christian Aid, Comic Relief and UNICEF.

By last autumn the Robin Hood campaign had gained considerable extra momentum and support from prominent opinion formers, with a proposal from the European Commission to implement a financial transaction tax at EU level set to enter the legislative pipeline. The campaign also attracted extensive criticism, with a global implementation of the FTT tax being opposed by a number of G20 members – including the UK Government at the November Summit.

However, the past week’s internationally-co-ordinated campaigning for the Robin Hood tax  has focused the world’s attention on what this tax could do, in the UK it could  generate upwards of £20 billion annually. If implemented in the USA and across Europe the tax could raise over £176 billion pounds a year. If agreed globally as much as £250 billion a year could go to vital needs like tackling poverty and climate change.

People across the world are making sure that this is one item that will stay top of the agenda. Last week the US National Nurses Union demonstrated in Chicago. This week German campaigners staged a mock marriage between Chancellor Merkel and President Hollande ahead of their meeting on Tuesday to emphasise the fact that the FTT is one measure they can agree on. A worldwide momentum is inching ever closer to making the Robin Hood Tax a reality.

Pressure is also coming from new quarters, including a group of United Nations independent experts who have urged the EU to take the lead in promoting the adoption of a global financial transaction tax to offset the costs of the enduring economic, financial, fuel, climate and food crises, and to protect basic human rights. A report from these experts says:

“Where the world financial crisis has brought about the loss of millions of jobs, socialized private debt burdens and now risks causing significant human rights regressions through wide-ranging austerity packages, a financial transaction tax is a pragmatic tool for providing the means for governments to protect and fulfil the human rights of their people”.

In Wales, we have already seen great support from our Assembly Members with over a third signing up in support – from three parties. First Minister Carwyn Jones became the first Government leader in the UK to publicly back the Robin Hood Tax. This has now been followed by support from Scotland’s Alex Salmond.

Money raised through the tax could fight poverty at home and overseas – crucial when we see rising numbers of people here in Wales struggling to make ends meet, and those in the world’s poorest countries already bearing the brunt of the financial crisis of the past years.

It could also tackle climate change which we know is already affecting the poorest people across the world either threatening their livelihoods and, in more severe instances sometimes, their lives. Some of the funds raised through the Robin Hood Tax could provide the much needed money to pay for low-carbon and adaptation measures when global agreements on how to pay for these have made far too little progress.

Predictably, the financial services naysayers are out in force forecasting doom if this tiny tax was ever implemented.

But it’s important that we set the record straight. The Robin Hood Tax would not affect retail banking and impact on individuals’ savings and mortgages. Instead it would target the casino style banking that caused the financial crisis in the first place – the often speculative trading on shares, bonds, foreign exchange and derivatives.

The financial sector continues to receive preferential treatment. For example, while the rest of us pay 20 per cent VAT on goods and services – the financial sector remains exempt. The UK government admits that the VAT exemption costs the rest of us £5.5 billion a year.

It could not be argued better than as Magdalena Sepúlveda, the UN Special Rapporteur on extreme poverty and human rights has put it:

“When the financial sector fails to pay its share, the rest of society must pick up the bill. It is high-time that governments re-examine the basic redistributive role of taxation to ensure that wealthier individuals and the financial sector contribute their fair share of the tax burden.”

What is remarkable is how a growing number of figures in the business world are now vocal in their recommendation for the tax to be implemented. Leading business figures across the world such as Bill Gates, Warren Buffet and George Soros have backed the proposal. Over a thousand of the world’s leading economists have also backed the tax and the IMF and the European Commission have both said that it’s feasible.  200 organisations across the EU have written ahead of EU Growth Summit.

Following a new study from leading economists – Stephanie Griffiths and Avinash Persaud – which shows that taking the positive and negative impacts of the tax together estimates that the net effect would be to add at least 0.25 per cent to GDP not reduce it.

Opponents are simply scaremongering in order to protect special interests. Persaud, who is the founder and Chairman of Intelligence Capital, has made this clear recently, saying that the tactics employed by London bankers today with regards to the proposal for a financial transaction tax are the same as those used by the tobacco industry many years ago. He calls it a “deliberate obfuscation”.

This misleading narrative is what we must expose and counter by galvanising the public to demand that this a small piece of justice must be delivered to the benefit of the people here and abroad.

Schopenhauer’s famous words are a perfect summary of what is now happening in this campaign and give hope that the journey of the financial transaction tax is most certainly heading towards reality – “All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.” World leaders have the biggest opportunity in decades to get this right. Change can lead the way. The time for action is now.

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Stephen Doughty is Head of Oxfam Cymru whose online petition showing that Wales backs the Robin Hood Tax can be accessed here

7 Responses to:“Wales takes lead in Robin Hood tax campaign”

  1. Ian says:

    Hang on! Yesterday, the Labour MEPs in Europe abstained on a vote to support it. The Plaid Assembly group support it 100% and our MEP also voted for it in Europe yesterday. Am I missing something here?

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  2. Luke Nicholas says:

    This is a timely article as there was a European Parliament vote yesterday, with a clear majority voting in support of an EU-wide FTT – but despite the First Minister’s position, the Welsh Labour MEP Derek Vaughan did not form part of that majority. He abstained and Plaid Cymru’s Jill Evans was the only MEP to vote in favour. Ed Balls has also signalled his opposition to an FTT unless it is on a worldwide level, and that he does not support an EU-wide tax as a precursor to a worldwide tax. Carwyn Jones indicated on Tuesday that he also supports this.

    I appreciate the enthusiasm in this article but we are simply not going to get an FTT without the UK backing it – and with the Tories and Labour refusing to do so, the signs do not look good. This campaign must continue and in fact be ramped up now that the issue is firmly on the EU agenda as a live proposal.

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  3. Syd Morgan says:

    The voting pattern of our 4 MEPs on this is fascinating. Jill Evans (Plaid Cymru) voted for; the only one. The Labour MEP abstained and Tory and UKIP voted against. The ‘No’ vote argument is that the tax is bad for the financial sector in London and south east England, something dressed up as ‘the British national interest’. Yet with an EU-wide tax, we would be a net beneficiary. We have a small financial sector and benefit greatly from EU funding in other sectors. FTT means, not only fair taxation across the EU, but investment in sustainable economic development here.

    This is yet further evidence that the Welsh national interest diverges from that of the UK state. It is also is a classic illustration of the difference between “primordial” and “instrumental” British nationalism as described by McLean & McMillan in their “State of the Union” (2006). Primordialists (Conservative and UKIP) believe that Britishness is an end in itself. Instrumentalists see it as a means to an end. In this case, only the Plaid Cymru MEP got it right for us.

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  4. Mark Jones says:

    I do not think that anybody will really be surprised by the anti-Welsh vote of Kay Swinburne, Tory MEP, and John Bufton, UKIP MEP, as their parties have no real concept of the “Welsh national interest”, as it was labelled. The abstention of Derek Vaughan, Labour MEP, is very disappointing, as a group of his party members across Cardiff told me last week that Derek, being a socialist, would support this vote. Very disturbing to think that Welsh Labour has become yet another capitalist-friendly British Nationalist organisation.

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  5. R.Tredwyn says:

    Some people believe in fairies, never mind Robin Hood. Just think about this tax. If a lot of financial transactions are pointless or of low return the tax will discourage them from happening. That might be a very good thing – but then the tax will not raise much revenue. If transactions go ahead anyway it’s because those people doing them consider them worthwhile. Who then will pay the tax? Banks? You must be kidding. Companies carrying out exchange rate transactions will pay the tax, pension and insurance funds buying and selling stocks and shares will pay the tax. Companies will pass costs on to consumers and if pension funds have lower returns it comes out of pensions or on to insurance premiums. Naive to think the Sheriff of Nottingham is going to absorb £20 billion of taxes out of the kindness of his heart. The peasants will pay as usual. The only interesting question is – is this tax more effective than other taxes? – because it is not tapping some new source of funds.

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  6. Evan Price says:

    Above all else, tax should be effective. The proposals for an EU wide FTT are simply absurd.

    We already have a transaction tax – on property – it is called Stamp Duty Land Tax (and it replaced a tax on documents called stamp duty) and it is raised on certain transactions on property in Wales. While we are experiencing a levelling off or decline in property values in Wales at the moment, is there any evidence that the existence of this tax has had any ameliorating effect on the massive property price boom that we have been through in recent years?

    We must not ignore that Tobin’s idea for a transaction tax as ‘grit in the machine’ was part of an argument – it was not a seriously thought through proposal – and the only place that has actually tried it (Sweden) on financial transactions discovered it was a disaster and removed it within a short period.

    For those who point to the apparent tininess of the proposed tax, the margins on many financial transactions at which this tax is aimed are a fraction of the proposed tax – so the effect would almost certainly be to eliminate the transactions rather than tax them.

    Finally, as another has pointed at – the people who would pay would be us – through our pensions and other investments – and given that these are dependent on the success of the markets through which we invest, any reduction in their capital value would be to our detriment … so to claim that this is costless is quite simply an affront to the probable truth.

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  7. Neil Watkins says:

    Very intersting article, I know you put the Welsh perspective but didn’t Cameron rule it out this week? We are only getting bits and pieces on the Tobin/Robin Hood Tax so maybe the time is right for the public to be given a full breakdown of how it will work and what effect it will have on their wallets, then the benefits it will bring to their countries.

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