Real Question:

Is this true?

Technically this is also wrong: the (Tobin) tax can be applied to sterling without any agreement from any other nation. All sterling eventually flows through the Bank of England. Taxing it is easy.

You see, I\’ve got this feeling that this is the way the US thought about dollars once upon a time. So they imposed a witholding tax (I think that was it) and thus there grew up the Eurodollar markets to avoid this tax. That is, trades in dollars which did not clear through the US (at least that\’s my undersatnding of what happened).

And I\’m pretty certain that there is a Eurosterling market as well…..

Anyone care to correct either myself or Ritchie?

5 comments on “Real Question:

  1. There are certainly Eurosterling bonds issued by a number of companies.

    Here and here for example.

    There is nothing stopping any two parties agreeing to contract in £stg, either – regardless of their various domiciles and a complete lack of any connection (either for the contract or the wider parties interests) to the UK.

    ‘Eventually’ is such an interesting word – what he says may strictly be true (although there is nothing stopping you paying a £stg debt in an agreed amount of $us or €) – but there is no need for it to flow via the Bank of England after each transaction. Which is what you actually require for a Tobin Tax – you are taxing the transaction not the £ itself.

    And this is an accountant?

  2. Your version is correct.

    Further, a ‘Tobin tax’ is not some theoretical thing, we actually have it in the UK for share transactions and it is called ‘Stamp Duty’ (half a per cent of purchase price).

    As a result of which a lot of unit trusts etc have relocated to Dublin (where there is no stamp duty) or Netherlands (where they got rid of Stamp Duty a couple of years ago). Although they still have to pay SD when they buy and sell UK shares, there is no SD or SDRT when people buy and sell units in the unit trust.

    See also “American Depository Receipts” and Stamp Duty Reserve Tax etc, at which stage nobody really understands it any more.

  3. Correct. A Tobin tax would add even more lustre to such places as Singapore, which are run by those unimpressed by the current hysteria about “unregulated” (ho-ho) capitalism.

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