Timmy Makes the Mail!

I think this makes it the full house of the UK\’s newspapers: excepting the Morning Star perhaps.

Advocates of a tax on financial transactions say the proceeds could be used to help to stabilise indebted eurozone countries.

However, the IEA\’s report, compiled by economics expert Tim Worstall, concludes that such a tax would yield revenues of less than 0.1 per cent of GDP.

Worstall estimates that the tax would trigger a 1.76 per cent decline in GDP, which would cut tax revenues by between 0.7 per cent and 0.9 per cent of GDP.

\’The proposed tax collects 0.1 per cent of GDP while other tax collections fall by 0.7 per cent to 0.9 per cent of GDP,\’ he writes. \’It is very difficult indeed to describe this as an increase in revenue.\’

Well, OK, not quite the full house. I\’ve written pieces for the Indy, Times, Daily Sport, Express, Guardian (although only online) and certainly had stuff in the Sun (as a press thingummy).

The IEA report can be downloaded here.

The conclusion reads:

As well as the EU, several papers on FTTs have been written by other more or less reputable organisations including the IMF8. There have also been studies from organisations such as the TUC and the Robin Hood Campaign, but we have restricted ourselves to details from those bodies with at least a working knowledge of economics and financial markets.
The end result of this survey of papers about the proposed financial transactions tax is clear. It is not possible to impose an FTT on foreign exchange transactions in the EU. An FTT will not reduce volatility, it will increase it. An FTT would not have prevented either the Great Financial Crash or current sovereign debt problems. It would shrink those parts of the financial markets which did not in any manner contribute to these problems.
An FTT is feasible but then so are many things that are not desirable. The FTT would not increase revenue collected. Indeed it would reduce total revenue by shrinking the overall economy. Finally, those who would carry the economic burden of the FTT would not be the banks but workers and consumers in general, and their burden would be more than 100% of the revenue raised by the FTT.

I\’d be most interested in anyone who actually supports this tax trying to have a go at my evidence, logic or conclusions. Have at it peeps, you know you want to.

11 comments on “Timmy Makes the Mail!

  1. Bill Nighy in interview with Lucy Kellaway in Weekend FT a week or so ago said that he hadn’t read any of the arguments against the Tobin Tax.

  2. Tim, the best argument I can think of against your position is that all taxes cause deadweight losses and cause reduced economic activity, and these effects of the FTT might be lower than for other taxes. In fact, it seems the whole purpose of the FTT is to create a deadweight loss. If that is the case, it is analogous to tobacco taxation and done for the same reason. If you abolished tobacco taxes, economic activity would rise (most of it in the form of greater tobacco sales), but if we believe the social good of reduced tobacco consumption is worth more than tobacco companies making extra profits, we keep the tax, despite it being an overall cost to the economy. The same logic might apply to the FTT.

    Note, I say “might”. Its proponents need to explain what social goods arise from the tax – as you’ve comprehensively made the case that this tax will not increase revenue.

  3. Interesting your GDP calculation is identical to the Commission’s. How did you calculate yours?

    Tim adds: As in the report, I’m quoting the Commission’s calculation. Which explains the similarity nicely really…..

  4. JamesV

    “it seems the whole purpose of the FTT is to create a deadweight loss.”

    No, that’s the impact not the purpose (at least not the stated one)

  5. Made the Mail ?Great! A paper that has done more than even the Express to wreck the British way of life by roaring on runaway house price inflation.

  6. Stupid Chris
    Not missing the point:making the Mail is TW’s title to the above. So try something other than ad hominem insults if you’re so concerned with some notion of the higher relevance.

  7. Sometimes I think people in the EU are proposing the FTT even though they know it’s a dumb idea. This is because they are convinced that the UK/Sweden/Denmark/Others will block the proposal and they think they’ll be able to use this fact to get these countries to concede on something else, or otherwise at least be able to point and say ‘look we tried to do something and they blocked it, don’t blame us’. At other times I think I’m giving them too much credit and maybe they are just that stupid.

  8. @Emil,

    One of the stated purposes is to reduce speculation (leave aside for the moment whether this is a good or bad thing), and the proposal is effectively to achieve this by increasing the gap between what speculators buy or sell something for and what they actually get for it. I think that counts as intentionally creating extra deadweight losses. By increasing the cost of transaction, speculators will need to expect a bigger price difference between the times at which they buy and sell in order to make their trade worthwhile.

  9. I like the bit that says, “We’ve ignored those people who don’t know what they’re talking about”.

    Tim adds: I do like writing for the IEA as they let me put that sort of stuff in.

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