from SMH
PETER SINGER
March 31, 2010
For the first time in history we have the ability to eradicate large-scale extreme poverty and the suffering it brings. The question is whether we have the will to do it. Growing support for a global financial transaction tax – known as the Robin Hood Tax – offers an exciting glimmer of hope this really could happen.
For almost 40 years I have advocated that those of us fortunate enough to live in affluent nations have a responsibility to help those who cannot meet their basic needs. If we accept we have an obligation to save a small child who has fallen into a shallow pond, even if that will ruin an expensive new pair of shoes, then don’t we have an obligation to do at least as much for children in developing countries dying from easily preventable diseases?
Contrary to the popular belief that poverty is a black hole into which we could pour an endless amount of money without seeing any results, aid to the poor really works.
Fifty years ago 20 million children died before they reached their fifth birthday. Today it is down to 9 million – still far too many, but remarkable progress considering that the world’s population is now more than twice what it was in 1960.
If resources can be mobilised, it is possible to lift hundreds of millions of people out of poverty and alleviate the death and suffering of the billion people surviving each day on less than what most of us spend on a bottle of water.
The response to the global financial crisis shows trillions of dollars can be mobilised at barely a moment’s notice when governments think the stakes are high enough.
If we can raise that much to save the banks and boost our own economy, can’t we raise even a small fraction of that to help a billion people in extreme poverty?
(It would be a small fraction. Jeffrey Sachs, who led a United Nations taskforce on the cost of meeting the Millennium Development Goals, estimates this would cost $US135 billion ($147 billion) in the first year, rising to $US195 billion by 2015. The goals include halving the number of people living in extreme poverty.)
The idea of a tax on global financial transactions, with the money going to help the poor, has been around for decades but without going anywhere.
Now 350 economists, including Sachs and the Nobel laureate Joseph Stiglitz, from more than 35 countries have signed a letter to the leaders of the Group of 20 countries calling on them to impose a tax on financial transactions.
Suddenly the leaders of Europe’s three biggest economies – Angela Merkel of Germany, Nicolas Sarkozy of France and Gordon Brown of Britain – are promoting a financial transaction tax as a way to fulfil commitments to domestic budgets, climate change and international development.
At the G20 summit in Pittsburgh in September world leaders asked the International Monetary Fund to draw up a plan for such a tax. It seems the global financial crisis has provided a window of opportunity for a shift in the readiness of governments to ho2ld the financial services sector to account.
Jubilee Australia and a coalition of local organisations are launching the Australian arm of the global Robin Hood Tax campaign, ”turning a crisis for banks into an opportunity for the world”. Its goal is to build on the current momentum to achieve commitment to a financial transaction tax at the G20 summit in Toronto in June.
The tax would be levied on every financial transaction between financial institutions, but not on transactions conducted by individuals. The tax could raise as much as $US400 billion a year for poverty reduction, climate change action, world health, education and more.
Achieving a financial transaction tax in June is a real possibility – but “how much?”, “from whom?” and “to what end?” will be crucial. Support from, and pressure on, the major G20 members is essential to achieving equitable and transparent answers to these questions.
Regrettably, the federal Treasurer, Wayne Swan, did not support the tax at the G20 finance meeting in St Andrews in November. Australia has come through the global financial crisis relatively unscathed. The
Prime Minister, Kevin Rudd, is in a position to take a lead and advocate on the basis of justice – not economic self-interest or political expediency.
Peter Singer, author of The Life You Can Save, is professor of bioethics at Princeton University and Laureate Professor in the Centre for Applied Philosophy and Public Ethics at the University of Melbourne.
G’day
I trade currency for a living, with my own resources. I finished university in the past two years and now I am working for myself. I don’t work for a bank and I am certainly not ‘rich’, but rather trying to make ends meet with my newly started business. I already pay tax on my profits, and this tax helps our Australian government provide services for us all, help other less fortunate citizens and provides a paltry amount of aid for overseas development. I am not the only person who gains from my earnings, but also my fruit shop, supermarket, landlord, newsagent and bike shop do too.
I complete, on average, about 15 deals a day at about 3x leverage, representing an account turnover of 45 times. If I had to pay .05% tax each time I bought and a further .05% tax each time I sold, my trading account would drop by 4.4% each and every day. Try running a business with those costs. I wouldn’t do nearly as much volume if this was the case and neither would any other short term trader.
Presently I correct market imbalances in certain currencies, and these imbalances are small, in the region of 0.1% or 0.2%. By correcting imbalances I mean that if the currency is down I tend to be a buyer and if the currency moves up, I tend to be a seller. It is a cushioning effect.
Now when this tax comes in, all the people who corrected imbalances of 0.1% and 0.2% would move to a different timeframe, this time correcting imbalances of perhaps 1% and 2%. And it is likely the people who used to cushion a 1% to 2% swing would now start cushioning a 5% to 10% swing. Market movement is all about searching for liquidity. Impatient sellers push prices down to find buyers, and impatient buyers push prices up to find sellers. When the immediate sellers and buyers have all left the market as their costs are prohibitive, those big buyers and sellers would need to search even harder (read push prices around in a more extreme fashion) to complete their deal. The .1% and 0.2% people are all gone, taxed out of existence, the volume is now found by the big buyers/sellers, provided by the bargain hunters beyond a 1% or 2% swing, and major news events that have 1% to 2% movements could become a 5% or 10% move so the liquidity could be found. This is not an orderly market.
If a greater portion of the market was attempting to correct such wild swings, (and a 1% or 2% move in a currency is actually quite volatile over a period of a few days), then I strongly believe there would be much wider swings in financial markets as the short term cushioning is removed, and ‘bargain hunters’ are less active due to the extra cost in establishing a position.
If you had an account of $15,000, a .05% tax on each transaction, with 15 deals per day each at 3x leverage, would take 4.4% or $660 each and every day from the traders account. This is regardless of whether a trader is profitable or not. The profitable trader pays tax anyway on her gains, at the full rate of income tax. And most traders who start in this business are certainly not profitable, thus people who routinely make losses would be paying tax on their activity.
If the aim of this is to tax the rich, why not stick to the principle of taxing income and not capital. Perhaps the aim is to catch more taxation revenue on the companies that use off-shore tax havens, and in this case moves should be made to reduce the taxation loopholes. It is not fair to tax a citizen if they cannot have a say in how that revenue is used. Taxation without representation was the catchcry that started the American war of independence, and now strangely they are the leading proponent of this new tax.
If the aim of this is to reduce volatility, it is mistaken, as many studies have shown that a transaction tax actually increases volatility and reduces the amount of trade actually occurring.
A transaction tax is a poorly considered idea, jumped upon by false populists. It is not the short term traders who caused this financial crisis. If revenue must be raised to help third world countries get out of poverty, it should be collected and sent by a national government who can at least provide accountability for the money and how it is spent.
Thank you for your time. Boo R.
Is this really asking you to be part of the World’s Greatest Bank Job (ha ha ha ha) or a conniving way to encourage you to be a part of the Worlds Biggest Con Job?
I just have to wonder how many folk actually have heard about the ‘Robin Hood Tax’ ? – (RHT) and more importantly have taken the time to find out what it is? where it comes from? what is actually involved? Let me tell you right now it involves BILLIONS OF DOLLARS, and of course, should it come to pass, just who will administer it?
http://just-me-in-t.blogspot.com/2010/04/men-in-tights.html