I’ve been digging around the InterWeb since I first came across the idea of this Financial Transaction Tax, and there is much more information about it than I anticipated.
Starting at the Wikipedia Page
It seems that the “Financial Transaction Tax” (FTT) goes under many different names, but (as I think someone mentioned earlier in this thread) its earliest incarnation was in 17th Century England when it was known as “Stamp Duty”.
That is: the tax that needed to be paid *BY THE BUYER* of shares, for “…the official stamp on the legal document needed to formalise the purchase.”
Hold that thought.
Next up, John Maynard Keynes (the person occasionally described as the Einstein of Economics), promoted the wider use of financial transaction taxes in order to reduce the excessive speculation that had brought about the Wall Street Cash.
And then, in 1972, when the Bretton Woods System
that had been regulating international finance since 1944 came to an end, a Nobel Prize-winning American Economist called James Tobin
reiterated the desirability of an FTT, and this became the idea known as “The Tobin Tax”
Crucially though, from the time of England’s “Stamp Duty”, and through Keynes’ and Tobin’s recommendations for an FTT, it was never proposed as a universal tax on *ALL* financial transactions, because the technology to effectively tax all financial transactions did not exist. So at each point in History when it was proposed, it was never proposed as a catch-all tax to replace all other forms of taxation.
Things are different now though.
Financial transactions – at least within OECD nations – are increasingly carried out electronically, rather than by using cash. It has been estimated that cash withdrawn from bank accounts circulates approximately 2.5 times before it is re-deposited; but where cash is still used, it is used for increasingly smaller transactions. Anti-Money Laundering Regulations also generally requires that deposits above a certain amount (e.g. $10,000/£10,000) are notified to regulatory authorities in the jurisdiction in which they are made.
The overwhelming bulk of Financial Transactions are within the Finance Sector, and these are, almost without exception, managed electronically.
The ability to track and monitor financial transactions in the second decade of the 21st Century is far greater than at any previous point in History, and it is a dynamic that is only going to further increase. The technological advancements around “e-Wallets” and Near-Field Communications (NFC) in smart-phones, increasingly means that cash is becoming an anachronism.
So, the practical limitations on being able to apply and collect a Financial Transaction Tax are evaporating. So what is preventing governments from implementing an FTT to replace all other forms of taxation?
Well, as it happens, Financial Transaction Taxes *HAVE* been introduced in various nations around the World already; in 2011, there were 40 countries that had FTT in operation, raising $38 billion
In most of these countries however, the scope of the FTT has been limited to financial instruments. That is: FTT’s purely on institutional financial trading. Only in Colombia has the government tried implementing the FTT across nearly all forms of financial transactions.
It seems then that the major opposition to a Financial Transaction Tax comes from Finance Sector institutions (naturally…); but this can largely be put down to the fact that wherever an FTT has been proposed or implemented, it has been presented as an *ADDITIONAL* tax, to be levied *JUST* on institutional financial transactions.
And naturally and obviously, the same financial institutions that carry a disproportionate influence over our “democratic” governments have opposed this.
But there *IS* an increasing groundswell of support for the FTT/”Tobin Tax”/”Robin Hood Tax”
. It is just that only very recently has the debate begun to shift towards a universal FTT on *ALL* transactions, as the *SOLE* form of taxation.
As it goes, the largest organisations spend vast sums of money employing accountants to figure out how best to shuffle money around the Globe in order to minimise (or eliminate completely) the amount of corporate taxes those organisations have to pay. At the same time, these same organisations are having to fight a rear-guard battle on the field of Public Opinion, when it is brought to light just how little tax these organisations pay, as a percentage of their massive profits.
A universal Financial Transaction Tax is not only much easier for these organisations to administer (and for governments to collect), it is also much more equitable and unavoidable.
It would/will completely alter the landscape of Capitalist-Democratic Society, in a way that it is very difficult for anyone of any political persuasion to object to.
Private citizens and commercial organisations will *ONLY* pay a miniscule (less than 1% tax) on money that they spend: they will pay no tax on anything that they earn. This ticks all of the boxes that Economic and Social Conservatives hold dear.
It is a form of taxation that is completely unavoidable. It is not “Progressive Taxation” in the sense that the more you earn, the more you pay; but nor is it a regressive form of taxation either, in the sense that the more you earn, the less you pay. It *IS* progressive in the sense that the more you *SPEND*, the more gross tax you will pay; but the rate at which you pay the FTT remains the same, no matter if you are spending $10k a year, or $10m.
And this is the best that those of a Socialist persuasion are likely to get, unless they can come up with a truly viable alternative to Capitalism.
I think that the main obstacle to the take-up of a universal Financial Transaction Tax today is simply that not enough people have got their heads around what it means, and that only if they have even heard of the idea of a universal Financial Transaction Tax.
The FTT *IS* a far more simpler and equitable form of taxation, with no down-sides that I (and many others) can see. But even if there are any as-yet-un-noticed negatives to a Universal FTT; it is hard to imagine that they would or could be any worse than the current, multi-layered, largely-incomprehensible, mostly inequitable, and frequently avoidable (to those who can afford to avoid them) forms of taxation currently in use.
All that needs doing now then, is for The Word About FTT, to be spread as far and as wide as possible.