Timmy Elswhere

At CiF.

On the Robin Hood Tax.

12 thoughts on “Timmy Elswhere”

  1. Unfortunately the piece makes an error. As far as I am aware the proposed tax on forex transactions if 0.005%, ie half a basis point, not 5 basis points. This makes rather a large difference.

    It is confusing, I think the Nighy film refers to 0.05% as that is over all types of financial transaction, and the proposal is to have different levels. The Ritchie paper certainly talks about 0.005%.

    [my view is that there could be a case for reducing trading volumes but I don’t think this tax is well though through and I distrust the fact its aims are so far removed from the likely outcomes]

    Tim adds: No, Robin Hood is 0.05%. Ritchie is 0.005%. Two different proposals

  2. I think you’re wrong, the RH tax is an ‘average’ of 0.05%. On forex from their website (as some evidence, not proof)

    Foreign exchange is the largest market in the world – worth $800 trillion a year, and yet it is the only area of the financial sector that has so far escaped any form of taxation. The UK could unilaterally introduce a levy on wholesale trades of sterling, no matter where in the world they take place, with the proceeds being captured automatically at the point of settlement. This would raise at least £3 billion a year and would not adversely affect UK trade, as a 0.005% FTT would be comfortably absorbed into margins of at least 10% (if not higher).

    Tim adds: No: the RH tax is reliant upon the Austrian paper. Which states 0.05% on everything.

  3. “The UK could unilaterally introduce a levy on wholesale trades of sterling, no matter where in the world they take place, with the proceeds being captured automatically at the point of settlement. This would raise at least £3 billion a year and would not adversely affect UK trade”

    Oh yeah, I’m sure that wouldn’t have any impact at all on the Sterling exchange rate now would it…

  4. Why is this called a Robin Hood tax? I thought he took money from corrupt politicians and officials, not financial transactions.

    margins of at least 10%

    Is the profit margin on foreign exchange that high? $80 trillion profit a year seems _way_ too big to me. $80 billion maybe. Or am I misunderstanding what you mean by the 10%?

    a levy on liabilities to buy insurance for the next crash perhaps

    Buy insurance from whom? Given that AIG failed, what insurance company (or market) is strong enough to be able to cough up $trillions on demand?

  5. “Oh yeah, I’m sure that wouldn’t have any impact at all on the Sterling exchange rate now would it…”

    No reason why it would, the exchange rate is set separately from trading volumes.
    ———
    “Buy insurance from whom?” This is always the problem, I guess what would have to happen is the fund buys government bonds in a sort of pre-funded bailout.

  6. “No reason why it would, the exchange rate is set separately from trading volumes.”

    No, it is a floating exchange rate, isn’t it? It is therefore set by the market. You see if the price for the Sterling increases (without an increase in the value of the things that you can buy for those Sterlings) then people will buy less of them and instead buy some other currency until the price decreases again.

  7. I’d have to think about that, but even if it was the case then 0.005% would make a $1.50 pound worth slightly less than 1/100th of cent different. This is far less than its volatility every day.

    this is obvious, btw, by considering the amount it is suggested it will raise ($3bn) and the amount of sterling that is bought every year.

  8. “$80 trillion profit a year seems _way_ too big to me.” That’s not profit, that’s the amount traded. The profit on each trade is a small percentage of that.

    It’s not a tax on profits – it’s a tax on transactions, regardless of the profit. That’s one thing that’s bonkers about this tax. Why not just tax profits? I guess “let’s raise corporation tax by 1%” isn’t a catchy headline.

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