1/4% Tax on all stock trades pushed in NY Times today

The Fund's report rules out a financial transactions tax – something marketed by campaigners as a Robin Hood Tax – as impracticable, and likely to cause economic damage by distorting flows of capital around the world.
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Quote from listedguru: They really beat up on the FTT pretty good IMHO
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Here is the IMF staff's assessment of financial transaction taxes (FTT) in their interim report for the Meeting of G-20 Ministers in April 2010:

"There may indeed be a case to supplement a levy of the kind described above (Financial Stability Contribution, FSC, and Financial Activities Tax, FAT) with some other form of taxation, but an FTT does not appear well suited to the specific purposes set out in the mandate from G-20 leaders", because:

- "the volume of transactions is a poor proxy for [..] the benefits it conveys on particular institutions [such as profits] or the costs they are likely to impose on it."

- "An FTT would not target [..] systemic risk ("any of [its] key attributes—institution size, interconnectedness, and substitutability"),

- "if the aim is to discourage particular types of transactions, this could be done more effectively by taxing or regulating them directly"

- "the incidence of an FTT remains unclear — it should not be thought of as a well-targeted way of taxing any rents that may be earned in the financial sector", "Its real burden may fall largely on final consumers (both businesses and individuals) rather than, as often seems to be supposed, earnings in the financial sector",

- it is "far from clear" what [..] "the [optimal] ratio of financial transactions to global GDP should ideally be",

- "it is difficult to distinguish ‘undesirable’ from ‘desirable’ short-term trading—or to assess their relative importance",

- "it is not clear that lower transactions costs worsen cyclical market price swings: asset bubbles arise even in markets with very high transactions costs, such as real estate. If the aim is to discourage particular short-term transactions, this can be done more effectively through regulation or targeted taxes."

- "It is now generally recognized that this is not always true that [..] an FTT would reduce market price volatility [..] in either theory (thinning of markets, for instance, can increase volatility) or practice (the empirical evidence suggesting that transactions taxes either do not affect price volatility or increase it)"

- "it would also increase the cost of capital for all firms issuing taxed securities, since investors require higher returns to compensate them for reduced liquidity",

- it "is a central principle of public finance that [..] more could be raised by taxing output directly" while "a tax levied on transactions at one stage ‘cascades’ into prices at all further stages of production". "This is why, for instance, most countries have found the VAT—which effectively excludes transactions between businesses—to be a more efficient revenue-raiser than turnover taxes."

- "financial transactions seem to be particularly vulnerable to avoidance by engineering: an example is the use of ‘contracts in differences’ [CFDs] in the U.K.",

- "While the FAT will fall on intermediate transactions, it differs from the FTT in not directly distorting activities of financial institutions"

- "a FAT would bear the same relationship to an FTT as the VAT does to a turnover tax—a FAT in effect taxes net transactions of financial institutions, whereas an FTT taxes gross transactions."

Source: IMF Staff Report "A fair and substantial contribution by the financial sector - interim report for the Meeting of G-20 Ministers", 16 April 2010, STRICTLY CONFIDENTIAL, URL: http://news.bbc.co.uk/2/shared/bsp/hi/pdfs/2010_04_20_imf_g20_interim_report.pdf
 
The RobbingHoods campaign in the the UK seem to have softened their demands after the IMF report. In the light of the inevitable they are now generously prepared to accept hundreds of billions of dollars (of other peoples money) through any type of tax. It doesn't necessarily have to be a transaction tax. Bless them.

http://tinyurl.com/236ne2e

[...]The IMF did not dismiss a transaction tax, they said it was practical, but favoured another kind of tax on profits and bonuses.

If this proposed tax delivers hundreds of billions of dollars for the poor both at home in the UK and abroad then it becomes as much a Robin Hood Tax as a tax on transactions.[...]

[...]if the IMF tax on profits can also raise hundreds of billions and be linked to fighting poverty and climate change we would be hugely supportive of it.[...]
 
the 1/4 tax on transactions would be like taxing bets on the casino.

most of the transactions or volume is short term trades and zero sum a the end of the trading day.

it would suck liquidity out of the market via tax. the gov't would be the most profitable market stake holder with this tax.

traders already pay income tax and sales tax with their income so the gov't will get their money either way or gov't will get their cut either way


Quote from Explorer:

The RobbingHoods campaign in the the UK seem to have softened their demands after the IMF report. In the light of the inevitable they are now generously prepared to accept hundreds of billions of dollars (of other peoples money) through any type of tax. It doesn't necessarily have to be a transaction tax. Bless them.

http://tinyurl.com/236ne2e

[...]The IMF did not dismiss a transaction tax, they said it was practical, but favoured another kind of tax on profits and bonuses.

If this proposed tax delivers hundreds of billions of dollars for the poor both at home in the UK and abroad then it becomes as much a Robin Hood Tax as a tax on transactions.[...]

[...]if the IMF tax on profits can also raise hundreds of billions and be linked to fighting poverty and climate change we would be hugely supportive of it.[...]
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Bank tax failing to win G20 support

http://www.financialpost.com/story.html?id=2943451

WASHINGTON -- There was widespread disillusionment among most Group of 20 countries for a proposed universal bank tax, with the exception of the major European economies, and this sentiment will be reflected in the final communiqué the group will release later on Friday, says a source familiar with the discussions.

The source, who spoke on condition of anonymity, said the communiqué will not endorse the global bank tax, as championed by Britain, France and Germany, which Canada has vehemently and openly opposed.

Instead, the communiqué from the G20 finance and central bank officials will reinforce the need for the world's most important economies to address the core issues of the financial reform agenda: the quality and level of capital banks hold on their balance sheets; limits on leverage; and better supervision of financial markets.

More to come ...
 
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