User:Beganlocal/Sandbox/Robin hood tax

The Robin Hood tax is a proposed tax on Financial transactions. Similar to the Tobin tax, it aims to raise money for International development, but also to provide extra funds for governments to tackle poverty and climate change domestically. The campaign for the Robin Hood tax was launched on 10 February 2010 and is being run by a coalition of over 50 charities and organisations, including Christian Aid, Comic Relief and UNICEF.

The Campaign
The campaign has proposed to set taxes on a range of financial transactions - the rate would vary but would average at about 0.05%. The tax would be applied to those trading in financial products such as stocks, bonds, currencies, commodities, futures, and options. It would affect individual investors, banks, hedge funds and other financial institutions.

The amount of money raised would depend on a number of different factors, including how many countries agree to the tax and the rate. The campaign has said, "$400 billion is our best estimate of what the tax will eventually raise from a range of rates on different transactions."

It has been proposed by the coalition that the money raised from this tax be split between domestic use and international aid.

The campaign has arisen in the context of emerging high level support for a global tax on banks. At the February 5, 2010 G7 meeting in Canada consensus was formed for a ongoing levy charged against large banks to cover the cost to government of insuring banks against future crisis. G7 officials plan to seek approval from other G20 nations at the June 2010 summit before progressing towards implementation. However the FT reports the international consensus now favours a staight-forward levy against various bank assets rather than a robin hood style transaction tax.

Journalist Polly Toynbee has written about the Robin Hood tax campaign in the context of a recently re-ignited class war, which she says was started by the rich, with groups such as the Institute of Directors lobbying for heavy cuts in public spending, in taxes and in the protection given to agency workers. While the campaign is international, much of the early focus has been in Great Britain, with grass roots supporters being encouraged to lobby MPs and the British Treasury for an early form of the Robin Hood tax to be announced unilaterally as part of the UK's 24th March 2010 Budget.

Comparison with the Tobin Tax
Tobin suggested a form of currency transaction tax. This is a type of financial transaction tax, which taxes specific types of currency transaction. This term has been most commonly associated with the financial sector, as opposed to consumption taxes paid by consumers.

The Robin Hood tax is similar to the Tobin tax but would apply to a broader set of finacial sector transactions.

Another difference between the Robin Hood Tax and the Tobin Tax is that the Tobin Tax was intended primarily to stabilise the economic market rather than generate revenue. Economists and analysts are now divided as to whether a small transaction tax would have a significant braking effect on the velocity of trades. The primary objective of the Robin Hood Tax campaign is to generate revenue which could be used domestically and to fund international aid.

Arguments against the tax

 * Effectiveness may depend on simultaneous implementation across the G20 nations


 * The Argument: It will not be possible for the tax to be implemented successfully because in order to do so it would have to be implemented universally. It is unlikely that every country would agree to the tax. A possible outcome if only some countries implement the tax is capital flight and reduced investment in the financial markets covered by this tax.


 * Counterargument: Many countries already have Financial Transaction Taxes. The UK's stamp duty on shares is one such tax which raises substantial revenue and has not significantly impacted activity in these markets.
 * Worry that the burden of the tax will be shifted onto consumers


 * The Argument: The proposed tax would impose a fixed cost on regular financial business conduced by the public. Examples include the purchase and sale of savings and investment products, and also foreign currency. Banks must engage in certain derivatives transactions to mitigate some business risks - the clearest example is hedging of short term interest rate risk by banks offering fixed rate mortgage products. This tax would increase the costs of such routine transactions and financial institutions would pass this to the consumer.
 * Counterargument: It is thought that the revenue from this tax would be taken from the profits of lucrative financial institutions. However it is a tax on transactions - economic activity - rather than a tax on income and profits. As the tax would be applied universally, there is no incentive for individual financial institutions to absorb the additional costs to remain competitive. A likely outcome is that at least part of the tax will be passed to the consumer.

Additionally, such a tax would reduce the incentive to provide liquidity to the capital markets. Both institutions and private traders currently act as liquidity providers standing willing to buy or sell immediately at prevailing prices. If such a tax were implemented, such activity would become uneconomic, resulting in wider bid / offer spreads and therefore increased trading costs for all market participants. Overall trading volumes would decline as a result.
 * Potential damage to the finance sector.
 * The Argument: The Robin Hood Tax would hurt the finance sector. According to the United States Chamber of Commerce, the tax could double the cost of certain financial transactions;   could cause the Dow Jones Industrial Average to fall by 12.5%.

Celebrity involvement
The campaign involves a film made by Richard Curtis and staring Bill Nighy, in which Bill Nighy plays a banker who is being questioned about the Robin Hood tax. He eventually admits that the tax would be a good idea and would not be too damaging to the financial sector.

Online campaign
The proposed Robin Hood tax has been accompanied by a large digital campaign. The main sources for this are:


 * The Robin Hood Tax website


 * Facebook


 * Twitter


 * Flickr


 * Youtube

Notes and references
Robin Hood Steuer