Robin Hood stole from the rich and gave to the poor, but as the latest financial analysis shows this is exactly why the Financial Transactions Tax (FTT) couldn’t have a more unsuitable nickname.
Lobby groups have hailed the FTT as a way of getting taxpayers a bit of their money back. The massive campaign has estimates that the tiny tax on the financial sector will generate a hefty £20bn annually, for Britain alone.
For those who don’t know, the so-called “Robin Hood Tax” is designed to apply a small amount of tax to equities, bonds and derivatives trades. It is expected that a stock or bond trade will receive a 0.1 per cent tax rate, while a financial derivatives contract will receive a charge of 0.01 per cent for every transaction. Surely with 11 Eurozone members (including France and Germany) signing up for the FTT it must be a good idea? So, why on earth did UK Chancellor George Osborne become 'The Sheriff of Nottingham' and launch a legal challenge against it, even though Britain did not sign up for it?
Well, there is good reason, and surprisingly, the motivation for not wanting to be part of the FTT regime is not actually to entirely protect the bankers.
Underneath the glossy veneer of the Robin Hood analogy and the glamour of Bill Nighy's association with the cause, there is actually a whole mess of problems waiting to spill out after implementation of the FTT, which is slated to start next year for adoptees.
The latest report from the independent economic consultancy Oxera revealed that the FTT will end up “affecting transactions undertaken by pension funds and would reduce the returns of pension products.” This will affect everyone that is saving for retirement. With historically low interest rates in the UK, this would represent another unwelcome blow for conscientious savers. And the bad news doesn’t end there.
You know those billions of pounds that lobby groups promise to get back for us through the Robin Hood Tax? According to independent economic research, FTT actually reduces total tax revenues from the economy. “Based on the current total tax revenue burden of around 40 per cent of GDP in the 11 participating Member States, it can be estimated that some 80 per cent of the €35bn estimated revenue would be lost owing to the negative impact on other tax sources,” said the Association for Financial Markets in Europe. In other words, the FTT is poised to drive away business from those countries, bring in less tax revenue as a result and therefore cancel out most, if not all, the 'profit' that would have been made from the Robin Hood tax in the first place.
With every single taxed transaction, it automatically becomes more expensive for a bank to trade - and before you rejoice that this means bankers will be giving money back to the economy, remember that as a consequence it will also become more expensive for businesses to borrow money.
The complexities have not yet been worked out. but the bottom line is that it's not only the bankers who will be hit hard by the FTT, but also you, me, your family-run business, and anyone else saving for old age.
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