An international financial transaction tax, the solution proposed by economists X to combat poverty and climate change Robin Hood Tax, Tobin Tax or TTF: whatever you call it, the idea of a financial transaction tax to reverse the negative effects of globalization balance is increasingly discussed with each new economic crisis. And for good reason. The principle is simple: given the volume of transactions in the financial markets, a tax with an extremely low rate would make it possible to collect significant tax revenues without affecting the functioning of the markets.
The FTT has all the hallmarks of being a good tax: it is low-distortion, with strong redistributive effects, potentially high revenues and low collection costs. Another reason for the popularity of the FTT is the explosion in the volumes of shares or other securities traded in the financial markets that has taken place following the financial liberalization of the past few decades. Since the 1970s, the number of global stock transactions has increased more than 300 times. In France, the annual amount on the Paris stock exchange was 3.5 billion euros in 1970, 9 billion in 1980, more than 100 billion in 1990, more than 1,000 billion in 2000, to now exceed 2,000 billion. It is probably for all these reasons that it is today practiced, in various forms, in more than thirty countries: particularly in France, Italy, Spain, Switzerland, Hong Kong or Taiwan, and continuously for more than three centuries in the United Kingdom. Kingdom – stamp duty is even the oldest tax in force with our neighbors across the Channel. It is clear that the existing financial transaction taxes have not prevented the development of the financial centers that apply them, which are among the most important in the world.
Discussions about the FTT always focus on its impact: some hope to reduce market instability by discouraging speculation, while most opponents simply reject the principle of the FTT, fearing an increase in market volatility due to a lack of liquidity . Empirical studies show that the first and second hypotheses are incorrect. In its current form, the FTT has minimal impact on the markets. It is not the major upheaval some fear, but it is also not the definitive solution to the problems of the current financial architecture that others hope for. It is not about punishing the bankers or the markets, because a broad-based, low-rate tax does not create distortions, but generates high revenues, with low collection costs and a strong redistributive nature.
The FTT is therefore currently an important source of income for many countries. Each year it generates around £4 billion in the UK, more than €7 billion in South Korea, Hong Kong and Taiwan, and CHF 1.5 billion in Switzerland. In France, the turnover is currently around 2 billion euros per year. How much can an FTT bring in at a eurozone, European or even global level?
The equivalent of the French FTT or British stamp duty was extended to the G20 level despite numerous exemptions, between $156 and $260 billion a year, depending on the chosen nominal rate of 0.3% or 0.5%. About two thirds would be financed by the G7, a quarter by emerging countries. This would be sufficient, for example, to finance the fight against extreme poverty and climate change and to support low-income countries in the face of the upheavals for which our economies are primarily responsible. It would also be possible to extend the FTT to high-frequency trading, ie intraday trades: the proceeds could exceed USD 400 billion per year, which would only increase the transparency of the financial markets and increase public acceptance. enlarge.
In June, France and India will host an international summit in Paris for a “New Global Financial Deal” designed to reform the international financial architecture. A move towards an international financial transaction tax would be a historic first. A group of leading countries could agree on the parameters of this tax, to be implemented nationally by each country, and use the proceeds to fight extreme poverty and climate change. These funds can be transferred directly to multilateral funds or through countries that commit to redistribute the equivalent amount to predetermined institutions.
Faced with the explosion of needs to address global inequality and climate change, the economic recovery of the countries hardest hit by the pandemic, the reconstruction of war-ravaged countries, the reform of global food systems and all other major challenges we are faced with, can we still afford not to implement this fair and effective tax on the largest possible scale?
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Source: Corriere
I am Lawrence Sickels and I work in the news industry. For the past few years, I have been writing for The News Dept, a web-based platform dedicated to providing readers with quality journalism. My main area of focus is covering economic news and business trends across the globe. With my detailed knowledge of current affairs and market analysis, I am able to offer insightful commentary on economic issues beyond the headlines.
Having worked as a journalist for many years, I have developed an eye for detail when it comes to crafting stories that are engaging and informative. In addition to writing about economics topics, I also specialize in research-driven articles about finance and trade policy.
