Banking tax campaigners scent victory as Gates lends his support

 

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The Independent Online

Momentum gathered for a financial transaction tax (FTT) yesterday as Bill Gates's foundation made the case for a levy to G20 finance ministers in Washington DC.

Before Mr Gates's team made its presentation, details of a draft European directive emerged proposing that the European Union should go it alone in imposing a tax on financial trades. The proposal called for harmonisation of member states' taxes on financial transactions. The move aims to create new revenue for EU members to replace national contributions to Brussels' budget.

The tax would be broad, covering trades including shares, bonds, derivatives, and structured products to make sure activity does not move from one product to another to evade the levy. The proposal does not specify rates for taxing particular trades.

Mr Gates called for an FTT to be used to support development in poor countries. Geoff Lamb, the head of policy at the Bill & Melinda Gates Foundation, presented the case for a modest levy on share and bond transactions across the G20 economies that could raise $48bn (£31bn).

An outline paper written by Mr Lamb argued: "If a substantial part of the revenues could be allocated to development, this would be a useful addition to resources – and would [also] help some donor countries to meet their aid commitments in the current environment."

Between $100bn and $250bn might be raised by bigger schemes including derivatives, Mr Lamb said.

The UK Government is wary of proposals for an FTT and claims it would have to work globally to stop non-participating jurisdictions snapping up business. However, Mr Gates argues that this is not necessary.

America's richest man is said to have been sceptical about an FTT when he started work on his report. One of the examples that won Mr Gates over was the operation of Britain's stamp duty on share trades.

"FTTs of various kinds [work in] India and the UK and therefore seem feasible even without adoption," Mr Lamb wrote.

Simon Chouffot, a spokesman for the Robin Hood Tax campaign, said: "It's a bit disingenuous of the UK Government. Its own stamp duty on shares works very well and there has been no noticeable loss of business from the City – that is one of the best arguments going for an FTT."

A Treasury spokesman said: "The Government will continue to engage with its international partners on financial transaction taxes. But any financial transaction tax would have to apply globally – otherwise the transactions covered would simply relocate to countries not applying the tax."

The Nobel Prize-winning economist James Tobin put forward an FTT in 1972 when he proposed a levy on currency trades to reduce speculation after exchange controls were scrapped. The idea gained ground during the financial crisis as a way of making banks repay their debt to society.

As Prime Minister, Gordon Brown made a surprise call for an FTT in late 2009 but the move was seen to be aimed at UK voters at a time of public fury over the banks' behaviour.

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