Oh dearie me: Observer editorial edition

On the subject of a Tobin Tax:

It isn\’t even true that the City pays its way in other taxes. Revenue from the financial sector in the last five years of the boom amounted to around £200bn. The cost of the bailout is currently estimated at £850bn.


Tax revenue was as stated. The cost of the bailout is currently estimated in the £10-£20 billion range.

They\’re comparing the absolute (or nett if you prefer) revenue from taxation with the gross amount at risk in the bailout. But the gross amount at risk is simply not the same thing as the \”cost\”. That would be the nett amount. After the loans have been repaid, after the shares have been sold.

Now, you can in fact say that the \”cost\” is going to be £850 billion. But that assumes that none of the banks ever pay back any of the loans, that all of the toxic assets that have been insured fall to a value of zero and both RBS and Lloyd\’s go bankrupt entirely, meaning that the Govt\’s equity stakes in them are worth nothing.

But you would be near insane to think that all of that is going to happen….and we\’d all have rather larger problems if it did than whether bankers were opposed to a Tobin Tax. We\’d be using shotguns to get the last pallet of baked beans out of the Tesco warehouses if that happened.

But the biggest problem with this editorial? Nowhere does it mention tax incidence. It simply assumes that a Tobin Tax would be paid by \”the bankers\”. Which is absurd.

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