Will Labour run on a Financial Transaction Tax?

Labour have a finance spokesman who has never worked in the real world, and basically has very little idea about finance.

It wouldn’t be surprising if he did what the Democrats are doing now they are in opposition, and promote a Financial Transaction Tax.

To pay for the plan, the U.S. would impose what Van Hollen called a tiny fee on market transactions, of 0.1%. A Democratic aide said the fee would apply to any buy or sell transactions, and include stocks, bonds and derivatives. The plan would also limit tax deductions on CEO pay above $1 million.

So far this type of tax has only been promoted by the looney left, in the form of the Alliance and Jim Anderton, Mana, and the Greens.

5. Financial Transaction Tax

The Green Party will:

  1. Involve New Zealand with the group of countries working to agree on a tax on international currency movements, to set up a fund to provide capital for poor countries to improve their social and environmental wellbeing. This would discourage currency speculation without being high enough to impede genuine trade.

These taxes fail, France had a Tobin tax and it failed.

EDHEC called on the Commission to “draw lessons” from the recent failed introduction of the FTT in France.

“The taxed French stocks have recorded an average fall of 15% in volume compared with stocks that were not concerned,” Amenc said.

“Substitution effects have occurred between French and foreign stocks from the same sector.”

Amenc went on to say that some investors decided to modify their equity portfolios by underweighting French stocks in favour of non-taxed European firms as a result of the French FTT.

“This substitution effect will not fail to have consequences on the price of French firms and their capacity to raise capital in order to invest and create employment,” he added.

The Economist magazine looked at this very issue:

The evidence to support Tobin taxes is thin on the ground, however. Most academic studies generally agree that they may not necessarily decrease volatility in financial markets. An experimental study in 2010 by researchers at the University of Innsbruck suggested that a global Tobin tax would have little impact on volatility. And there is not much evidence at all that unilateral Tobin taxes work. Although large markets might see a fall in volatility, smaller markets would see a rise due to a fall in liquidity. Even Barry Eichengreen, a supporter of Tobin’s original proposals, now argues that a European Tobin tax may prove a “distraction” that allows systemic risks and instability to increase in other areas. For instance, according to Harald Hau, an economist at the Swiss Finance Institute and the University of Geneva, “credit misallocation” in the economy as the result of distorting equity and bond prices may make life difficult for small and medium sized business that cannot raise finance from abroad. In practice Tobin taxes imposed unilaterally have proved unsuccessful as markets have moved abroad to avoid them. Sweden’s experiments in the 1980s with a transaction tax on shares, equity derivatives and fixed-income securities ended in failure as activity moved offshore to avoid the levies. In the first week of the fixed-income tax bond trading volumes fell by 85%; the amount eventually raised from the tax averaged only about 3% of what was predicted. By 1990 over 50% of Swedish equity trading had moved to London.

Italy’s experiment didn’t start well:

Similar difficulties may lurk in Italy. Il Sole, a financial daily, has reported that Italian traders are beginning to move their residency to Malta, which has excluded itself from any such proposed tax. This suggests that the Italian government may not raise as much revenue as it originally thought. However, by not extending the tax to bonds, the Italians have attempted to avoid the pitfall identified by the International Monetary Fund that a tax on trading government bonds might increase the cost of public borrowing. This would have been disastrous for Italy, a country faring badly in the European sovereign-debt crisis. But has it avoided all the potential adverse effects of the policy? Current academic opinion suggests that this is unlikely.

Basically they don’t work. Which is why Labour will probably push to promote that…after all they failed with Capital Gains Tax.

 

– The Economist, Marketwatch.com

 


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  • Alloytoo

    In their rush to “punish” the successful, they never stop to consider why they’re successful.

  • conwaycaptain

    So someone goes and buys $5 at the dairy that is .0005 cents how are you going to charge this??
    I sent $5200 overseas yesterday that is $5.20 who is going to foot the bill for gathering in this HUGE amount of tax.

  • dgrogan

    So this is a re-packaged “Stamp Duty” then. Of course we’ve had it before on home loans anyway. Hasn’t done a hell of a lot to dampen house price inflation in the UK, I have to say.

  • Hard1

    If the Green Party disappeared would anyone notice?.

    • mike

      Yes… the overall IQ of Parliament would rise a bit

  • john Doe

    There are two sure things in life. Death and taxes. When Labour finally get to control the purse strings another certainty is that they will make up a plethora of new taxes to keep their thieving little fingers deep in our wallets.

    • Steve

      Including a wealth tax….aka death duties. Never erradicated from the statute books, just zero rated. It wouldn’t be hard for them to kick it into gear again

  • thehawkreturns

    Labour will try to dress this up as reducing “speculator’s profits” and market “volatility”.
    It is yet another way to strip money out of workers pockets (the biggest investors are to lose money here will be ACC and Kiwisaver/Super/Pension schemes) and into the blubbery fingers of Labour voters, waiting at the pie shop for another hand out

  • Day Day

    Labour will again consign themselves to opposition benches, campaigning on more taxes. In addition it will be tinkering with the pension funds of the workers.

  • Cadwallader

    No, this idea was not originally from the Left. It was a plank of Social Credit policy. The Social Credit ideas were weird by the standards of their day but they are starting (only starting) to look more credible when lined up against today’s fiscal illiteracy. The tax was looked at in the 1970s but with the technology of the time the costs of administration were too great to make it worthwhile.

  • Cadwallader

    If the best tax Labour can dream up these days is their CGT, with Death Duties by stealth, then they’ll never again be in government. Who is their current financial whiz-kid as I recall Parker was deposed after 2014’s fiascos?

    • Robbo got the job…

      • Cadwallader

        It seems there were very few applicants?

        • Under socialism, you don’t apply. You are given…

      • Aucky

        Just the man for the job too having such a vast wealth of experience in the world of commerce.

        • ex-JAFA

          He seems to know a lot about purchasing pies.

  • BR

    I thought we already had a financial transaction tax. GST I think it’s called.

    Bill.

  • cows4me

    The left are criminally insane, they are obsessed with stealing as much of other peoples wealth they can get their stinking hands on. Governments, usually socialist, struggle to pay the bills. The remedy of course is to steal more private wealth, the resulting outcome is a rapidly downward spiral. Like a dog chasing it’s tail the whole economy goes tits up and everyone ends up broke and destitute.

  • Whitey

    So, Labour have finally realised that CGT does not appeal to voters and have therefore come up with an exciting new fiscal policy – another new tax.

  • Cowgirl

    Tax, tax and more tax – and no imagination. How about finding some savings somewhere? I am beginning if these people will ever govern again. They haven’t worked out it’s not 1950 anymore.

    • ex-JAFA

      There’s only one party that wants to *reduce* government spending.

  • CheesyEarWax

    “Involve New Zealand with the group of countries working to agree on a tax on international currency movements, to set up a fund to provide capital for poor countries to improve their social and environmental wellbeing.”

    This is why the Greens are called loony and unfit for government. Which group of countries are waiting for us to work with them? They can’t even work on implementing existing company taxes across borders let alone a new transaction tax. As for a fund for poor countries, are we going to compete against the likes of Oxfam and Greenpiece? Anyway, we already have international aid funds for these types of purposes.

  • taurangaruru

    Labour have a finance spokesman who has never worked in the real world, and basically has very little idea about finance.

    When did Cullen get reappointed? I thought he retired.

  • EveryWhichWayButLeft

    “set up a fund to provide capital for poor countries to improve their social and environmental wellbeing”…

    There is so much wrong with this I don’t know where to begin.

    The Green Taliban constantly shout anger and spit bile at us because of the number of children living in so-called poverty. But wait, in the next breath they want to tax more and send that money offshore!

    They bring new meaning to the word stupid.

  • steve and monique

    Oh, the Squeals of more taxes from the left. God help us if these clowns get power.

  • sandalwood789

    We don’t need a new tax.

    All that is needed is to stop *wasteful spending*. I’ll bet that billions of dollars each year are wasted by central and local government.

    There would be many thousands of votes up for grabs for a party that promises to take the chainsaw to spending (especially if it involves cutting the size of councils and their salaries).

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