With the debate over the next week skewing towards the contents of George Osborne's red box - and no that isnt a euphemism - it is worth us looking at a tax which has been bottom-drawed but which could soon come back into prominence.
The election in France looks increasingly like we are about to see a Socialist President who has pledged to introduce a localised version of the Transaction or Tobin tax.
Listening to doom-sayers in the UK you would think this type of idea could kill off our financial services industry, and lead to a 'flight' of capital to other shores. I suspect France will prove otherwise if it is to embark on such a scheme.
I have just finished reading the Merchants of Doubt, authored by Naomi Oreskes - within she highligts how a group of senior lobbyists, scientists and business people, with deep connections in politics and the tobacco industry, ran extremely effective campaigns to mislead the public and deny well-established scientific knowledge on the link between tobacco and cancer.
The right excel at such tactics over the left it is argued because they lack a moral core; the same arguments against the Tobin tax, that it will make us noncompetitive, were used to oppose the minimum wage. The right never get it until they are forced too; they lack the progressive urge.
Indeed, it is the same tactics are being used by senior Tories, and their primarily banker-Tory-funding friends, to the proposal for a financial transaction tax (FTT), or Robin Hood tax. It is not the activity of bashing bankers that draws me to this debate, indeed I work within the sector, but the deliberate obfuscation by the sector in telling us of the damage.
Lets just get real: The typical management charge levied by a hedge fund or a private equity fund is “two and 20” — in other words an annual levy on the value of the assets of 2% plus 20% of the gain arising from investment performance.
At the other end of the spectrum it is estimated that the cost of dealing in shares which falls on a pension fund — after all manner of fund manager charges are taken into account — amounts to 0.7%.
Given that these charges exist, and are coincidentally broadly accepted, it is hard to see why the proposed EU transactions tax has stirred up such a nest of derision. Alas the money-lenders squeal loudly.
But given how much financial institutions skim off the funds which flow through the City in the normal everyday course of business, we really have to ask why they think an additional 0.1% going to the taxman would really make such a difference.
If what the City does is of such great economic value, then surely it can absorb an extra hit of 0.1%. If it is not of any economic value, then why are we doing it in the first place?
We really do need to keep a sense of proportion. In economic terms a 0.1% transaction tax is essentially no different from a 0.1% widening of spreads — the difference between the buying price and the selling price of a security. An increase in spreads on that scale would simply put us back in most markets to where spreads were 10 years ago. So why the panic?
Nor are we alone: they have transaction taxes in Hong Kong, in South Korea, in South Africa, in Switzerland and, amusingly, in the United States.
They don’t call it that in Washington but there is a transaction tax levy on all exchange business with the proceeds used to fund the Securities and Exchange Commission. It raises about $1 billion a year. And we also have to ask why it would be so much worse than the transaction tax we already have. Every British share bought in the UK attracts stamp duty. Every sale of domestic property above a fairly low threshold attracts stamp duty. Both equity and property markets have their ups and downs, their busy and their quiet periods but neither seems stunted or dislocated by taxes which are levied at a far higher rate than the EU has in mind
After hearing some of the bankers’ responses, you would be forgiven for thinking that transaction taxes are a peculiar poison, but the economic and market impact of such taxes is no different than any other transaction cost (such as trading commissions; dealer spreads; fees for clearing, settlement, using exchanges; administration costs and the price impact of trading).
It is not a lunatic left argument; and whats more the right know it.
Tidak ada komentar:
Posting Komentar