By Max Clarke
A tax on financial transactions for the UK would be ‘economic suicide’ and would offer little stability to the global financial market, an economic think tank has said today.
The most popular example of such a tax is the Tobin Tax, which imposes a nominal fee of under 1% on all transactions. The result, advocates argue, is a reduction in speculative trading and an increase in global market stability, as well as a vast source of revenue for the taxpayer.
To date, the only country to attempt such a tax is Sweden, which immediately saw 60% of the value of its top 11 stocks migrate to London.
Forex trading in London accounts for a third of the global total- a staggering $1.8 trillion each day. If the UK government implemented the tax, trading volumes in the capital would plummet overnight, compromising Britain’s economic interests.
Supporters of a financial transactions tax including the newer and currently more popular ‘Robin Hood Tax’ calculate some £20 billion could be generated for the UK’s coffers. Such claims, the Adam Smith institute’s report entitled ‘The Tobin tax: Reason or treason?’ argues, are ‘ill informed and reckless’. Governments across the world are not currently able to cooperate to the extent of implementing and then thoroughly enforcing such a complex tax.
Short of a global, unified tax, capital flight to cheaper markets- be they in Hong Kong or New York- would destroy the financial markets of any country that attempted to do so. The UK’s financial services industry currently employs some 1 million innovative workers. Many of these jobs would be compromised, along with a colossal revenue source for government if the tax were implemented in the UK.
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