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Tax on Trades Should Be Part of Rescue Plan, Some Democrats Say
- Thread starter seasideheights
- Start date
Is it time to throw out a solution that would still raise a lot of capital but not totally shut us down (along with a ton of online brokerages and who knows what else!), it would still be harmful but not as harmful for a lot of us? I really think increasing the short-term capital gains rate would raise a lot of money, too, along with doing away with the 60/40 futures treatment. I think if you concentrated on the fact that by driving business away from our exchange, it could do serious damage to the desirability of the dollar, and I'm not just talking its value, I'm talking people wanting to have it in their reserves, you might get someone to listen. Having an alternate solution would get them to listen a little harder.
All traders could stop trading for a whole day to protest this move.
I wonder how this would affect the markets. A trader's strike.
I wonder how this would affect the markets. A trader's strike.
Quote from seasideheights:
Representative Joe Barton on CNBC just said the Democrats have the transaction tax proposal on the table.
It's being considered again.
How is this idea going to be stopped in November if there's a Democratic President who will go along with the Democratic Congress???
I still say there is no way they actually impose this transaction tax. This would basically wipeout an entire industry (brokereage) overnight IMHO. Spreads would widen, liquidity would dry up, etc.
Let's just hope that someone takes one for the team and steps up and stops this madness...
Wake up politicians...
-Guru
10's of millions of americans trade 5 times are more a month. it would hurt millions. here's a piece i found on the indian transaction tax from 2004 article. apparantly its used to stop the flow of speculative money.
The Rationale
There are several justifications for the adoption of STT in the Indian financial markets.
First, the underlying logic of securities transaction tax is to slow down the flow of speculative money, as it would be taxed each time a transaction takes place. The STT is expected to curb purely short-term speculation by day traders, ânoise traders,â arbitrageurs and big operators without significantly affecting the long-term investors. The tax on equities held for a long period would be marginal while the tax on short-term trading would be higher. The STT would be a significant deterrent to speculators and day traders trying to make a quick profit on a huge sum by just trading, without taking any deliveries of stocks. The proposed tax would keep such players away, as they would have to factor in the tax cost.
The STT is expected to reduce the speculation in Indian financial markets, which are amongst the most speculative markets in the world. Compared with several leading international financial markets, the sheer volume of speculative trading in Indian markets is extremely high. It has been pointed out that Indian financial markets are second only to NASDAQ in speculation, thereby surpassing some of the leading international financial markets such as the New York Stock Exchange (NYSE), London Stock Exchange, and markets in Hong Kong, Singapore and Japan (2). Despite a sharp increase in the daily turnover in the Indian financial markets, actual deliveries are less than 20 per cent of trading. Due to excessive speculation, much of trading in the Indian markets is concentrated in a handful of stocks. The top 10 stocks account for over 80 per cent of the turnover of the Indian financial markets. The top 100 stocks account for almost 99 per cent of the turnover. While there are several thousand stocks listed in the markets that are not traded at all.
The speculative nature of Indian financial markets can also be gauged from the fact that the volume of secondary market trading has increased several times while new capital raised through primary market has significantly declined over the years. As rightly pointed out by L C Gupta, former member of SEBI, the high volume of speculative trading has not helped even a bit in strengthening the market's capital raising function, rather it had the opposite effect (3).
Over the years, we have witnessed that excessive speculative trading by big players more often than not degenerates into market manipulation. There is an entire history of frauds in the financial markets starting from the securities scam of 1992. The financial frauds recurring at regular intervals reveal that our financial markets are prone to abuse, manipulation and excessive speculation.
India has also the distinction of having extreme price volatility at the individual stock level. Short-term trading is one of the major factors responsible for increased market volatility. The financial literature suggests that transaction taxes increase asset price efficiency by curbing excessive volatility. By raising the cost of speculative trading, STT would contribute towards restraining short-term trading, thereby making Indian financial markets less volatile and more efficient. In the present times, the stability in financial markets is of utmost importance because the Indian policy makers are determined to invest pension funds in the financial markets. As any negative development in the financial markets can adversely affect savings, investments, exchange rates and interest rates, it is high time that financial stability should also be treated as a public good.
Second, the revenue potential of a 0.15 per cent of STT provides another justification. On an average, the daily trading in the Indian stock markets is about Rs 100000 million. By imposing a 0.15 per cent STT on this volume, the Indian tax authorities can collect Rs 150 million every day. As Indian financial markets operate on an average 250 days a year, STT could generate revenue of Rs 37500 million every year. This is a substantial amount in the present times when country is finding it difficult to raise revenues through taxation. India's tax-GDP ratio is among the lowest in the world and has fallen particularly in the 1990s - the decade of economic liberalization and globalization.
The Rationale
There are several justifications for the adoption of STT in the Indian financial markets.
First, the underlying logic of securities transaction tax is to slow down the flow of speculative money, as it would be taxed each time a transaction takes place. The STT is expected to curb purely short-term speculation by day traders, ânoise traders,â arbitrageurs and big operators without significantly affecting the long-term investors. The tax on equities held for a long period would be marginal while the tax on short-term trading would be higher. The STT would be a significant deterrent to speculators and day traders trying to make a quick profit on a huge sum by just trading, without taking any deliveries of stocks. The proposed tax would keep such players away, as they would have to factor in the tax cost.
The STT is expected to reduce the speculation in Indian financial markets, which are amongst the most speculative markets in the world. Compared with several leading international financial markets, the sheer volume of speculative trading in Indian markets is extremely high. It has been pointed out that Indian financial markets are second only to NASDAQ in speculation, thereby surpassing some of the leading international financial markets such as the New York Stock Exchange (NYSE), London Stock Exchange, and markets in Hong Kong, Singapore and Japan (2). Despite a sharp increase in the daily turnover in the Indian financial markets, actual deliveries are less than 20 per cent of trading. Due to excessive speculation, much of trading in the Indian markets is concentrated in a handful of stocks. The top 10 stocks account for over 80 per cent of the turnover of the Indian financial markets. The top 100 stocks account for almost 99 per cent of the turnover. While there are several thousand stocks listed in the markets that are not traded at all.
The speculative nature of Indian financial markets can also be gauged from the fact that the volume of secondary market trading has increased several times while new capital raised through primary market has significantly declined over the years. As rightly pointed out by L C Gupta, former member of SEBI, the high volume of speculative trading has not helped even a bit in strengthening the market's capital raising function, rather it had the opposite effect (3).
Over the years, we have witnessed that excessive speculative trading by big players more often than not degenerates into market manipulation. There is an entire history of frauds in the financial markets starting from the securities scam of 1992. The financial frauds recurring at regular intervals reveal that our financial markets are prone to abuse, manipulation and excessive speculation.
India has also the distinction of having extreme price volatility at the individual stock level. Short-term trading is one of the major factors responsible for increased market volatility. The financial literature suggests that transaction taxes increase asset price efficiency by curbing excessive volatility. By raising the cost of speculative trading, STT would contribute towards restraining short-term trading, thereby making Indian financial markets less volatile and more efficient. In the present times, the stability in financial markets is of utmost importance because the Indian policy makers are determined to invest pension funds in the financial markets. As any negative development in the financial markets can adversely affect savings, investments, exchange rates and interest rates, it is high time that financial stability should also be treated as a public good.
Second, the revenue potential of a 0.15 per cent of STT provides another justification. On an average, the daily trading in the Indian stock markets is about Rs 100000 million. By imposing a 0.15 per cent STT on this volume, the Indian tax authorities can collect Rs 150 million every day. As Indian financial markets operate on an average 250 days a year, STT could generate revenue of Rs 37500 million every year. This is a substantial amount in the present times when country is finding it difficult to raise revenues through taxation. India's tax-GDP ratio is among the lowest in the world and has fallen particularly in the 1990s - the decade of economic liberalization and globalization.
Just come back with the same fukin bill... it'll pass
Quote from Brandonf:
Whats wrong with sports?
Nothing. I'm a huge football fan. But, I also make sure I'm up to speed on financial issues, geo politics, US politics, etc.
As you probably know, there are many people that really are clueless about all of those things, they have no idea of what XYZ politician's views on the issues are or what the ramifications of their views are, yet still vote.