Taxing financial transactions: why the underdog is still my favourite
Mervyn King is at it today in the Financial Times, endorsing a global bank levy rather than splitting up the banks or a financial transactions tax. He describes the latter as the least likely outcome of global discussions and he may be right. But that doesn’t mean we shouldn’t, or won’t, get such a tax.
It’s not hugely surprising that so many bankers favour a bank levy most and a transactions tax least. A bank levy would take the least from them and, in its purest form, would be returned to them when they next bring the economy to its knees. What’s not to like, except that even a bit of enforced saving threatens their self-image as Masters of the Universe?
A financial transactions tax, however, would hurt them more (especially the wildest eyed of them, the ones Adair Turner called ‘socially useless’) and benefit the rest of us far, far more. Indeed, a tax rate of 0.05% would be small change for them but a huge change for the rest of us – hundreds of billions of pounds a year to spend on public services, combating climate change and international development.
So, whilst there is in reality nothing to stop the world’s political leaders opting for all three measures, the real prize – and therefore the one worth fighting hardest for – is a financial transactions tax.