EU Tobin Tax draft release
- Thread starter Dogfish
- Start date
Quote from benwm:
When Sweden introduced a FTT the volume of futures trading fell by 98% (See below). Don't know how you reached the conclusion that the market will benefit when there is no market?This proposal will impact jobs and growth and kill off any economic recovery.
Search for "Swedish financial transaction tax" on Wikipedia:-
"Even though the tax on fixed-income securities was much lower than that on equities, the impact on market trading was much more dramatic. During the first week of the tax, the volume of bond trading fell by 85%, even though the tax rate on five-year bonds was only 0.003%. The volume of futures trading fell by 98% and the options trading market disappeared. "
"Revenues from the tax on fixed-income securities were initially expected to amount to 1,500 million Swedish kronor per year. They did not amount to more than 80 million Swedish kronor in any year and the average was closer to 50 million"
"The Swedish FTT is widely considered a failure."
History repeats , we never learn..
Why do you say trading is a zero sum game? The economy benefits overall from the transfer of risk from risk averse to risk takers whenever a trade takes place. The farmer needs the speculator! Should politicians tax other transactions involving risk transfer, such as life insurance, home insurance, placing deposits in a bank, etc? There is a cumulative effect on the economy for every such tax.
This is perhaps a debate for another thread (and not one I want to get into now) but it is not realistic to believe that transactions will not move to Asia and non-EU nations however skilfully the EU bureaucrats draft their proposals. It is inevitable that it will fail to reach the goals of bureaucrats, certainly if the history of Sweden is anything to go by (and I believe it is).
The EU FTT is not comparable to the UK Stamp Duty Reserve Tax because in the UK market makers are exempt so the massively reduced volumes do not occur (only the little guy pays - a very regressive tax indeed). I agree with the other poster that market makers may get a last minute exemption but the little guy will still get screwed...that is very plausible...but the public will still be told it is a "tax on bankers".
Anyway, that's my two cents worth.
I don't disagree with risk transfer for genuine reasons, however the farmers who I have spoken too, and its not a huge number, told me they only hedge a certain % of the crop and do so at a few key times during the year. How often do you change bank, switch life insurance etc etc. The markets have evolved beyond what they were designed for.
I agree that in most instance Tax's do stifle growth, however I would rather see what opportunity grows out of the ash of an FTT tax then sit and watch the endless algo filth switching in and out of cash vs futures all day long trying to have no risk and just trying to nick a tick.
I agree that in most instance Tax's do stifle growth, however I would rather see what opportunity grows out of the ash of an FTT tax then sit and watch the endless algo filth switching in and out of cash vs futures all day long trying to have no risk and just trying to nick a tick.
Discussion on this tax completely misses important facts. Politicians wants to put restriction on free flow of capital and turn portion of it into budget for their spending. They want to double tax because income from capital and capital gains are already taxed. They forgot about risk involved in investing and that risk taking was the engine of accelerated growth of Western economies for the past 200 years. I guess they do not understand that you should not tax cow's feed but instead tax the milk otherwise you starve the cow and there is no cow and no milk. People do not understand basic economics and think that this tax is not affecting them and only big banks and bad traders will be hurt. On the contrary professional speculators and big banks will be just fine. Each and every person even those that have no direct exposure to the markets will be affected by this tax.
Well the French FTT exempts day trades, so its not so shocking that the EU 11 version might as well, given France is one of the main proponents.
The FTT will gain nothing by taxing day trades (you cant make money taxing something that will longer happen) so loses nothing my exempting them.
That said it is too early to guess what will be caught/exempt from the final implemtation. They may decide to exempt registered market makers only. Speculative day traders may get screwed.