The IMF’s new FAT tax goes far further than we expected. But it’s no Robin Hood.
There will be lots more comment on the IMF’s report, A Fair and Substantial Contribution by the Financial Sector, and there are positives and negatives. The TUC won’t reach a final conclusion for a while yet, but these are my own, personal initial thoughts after an evening of reading transatlantic emails and news analysis. I think the IMF report is a step forward, even if it is nowhere near enough. Campaigning for the Robin Hood Tax can and must continue.
Here are some key questions and answers.
What were we expecting?
A year ago, the IMF’s proposals would have seemed incredible. It is testament to how fast things are changing in this brave new world that many now see the IMF report as not going very far at all (the Party of European Socialists was first out of the starting blocks in condemning it, although their release tonight is more positive than their pre-emptive release this morning!) Just days ago, the consensus was that the IMF would propose a levy on the banks that would pay only for their own bail out. The IMF have gone far, far further. They have covered many more areas of the financial sector. They have explicitly accepted that the finance sector needs to pay back more than just what they received themselves – they need to make a contribution to the real economy.
What does the IMF say about the Robin Hood Tax?
Our fear as supporters of the RHT was that the IMF would say financial transactions taxes were impracticable (it didn’t – it noted there could be problems, but also implied that these might be overcome), or that they should be rejected. It didn’t even quite say that, although proposing something different is obviously not a positive recommendation. The IMF report repeats some rather tired and discredited criticisms of FTTs, and bizarrely worries about the impact on individual consumers while praising clearly regressive sales taxes like VAT. But the Robin Hood Tax is clearly still a live option, as it is the only way to raise the revenues we need to tackle budget deficits without penalising the poor, to address global poverty and to meet the challenge of climate change. I have to admit that our hero Paul Mason says “the Financial Transaction Tax – or Robin Hood/Tobin Tax – is ruled out. Though like a runner up at Crufts it gets a methodological pat on the head from the IMF guys” – but that’s a bit of a glass half empty analysis.
So, is it enough?
No, not by a long chalk. The IMF report accepts that the costs of the financial and economic crisis amount to 2.7% of GDP in the advanced G20 economies (ie nearly£50bn), but the Financial Activities Tax would raise (in the UK, the only place where it gives a figure) just 0.1-0.2% – or £1.75bn to £3.5bn. OK, even the Robin Hood Tax would not have raised enough to pay for the entire crisis, but it could have raised a substantial chunk – possibly an order of magnitude more than the FAT tax, ie as much as £30bn (probably best not to rely on these numbers, they are very back-of-the-envelope!)
What will happen next?
There are already howls of anguish from some sectors of the finance world (genuine enough, and allied with suggestions of rearguard actions enough to be believable, not Brer Rabbit-ism), and suggestions that proposals will be difficult to turn into reality – especially with the Canadian government opposed (no disrespect to my Canadian friends, who are FTT supporters anyway, but really: “global deal fails because Canada says no, only US, UK, France, Germany, Italy, Japan etc in support?” I can’t see it.) The IMF proposals will be refined for the G20 leaders’ summit in June, and Robin Hood Tax campaigners are likely to be pressing for that meeting to go further than the IMF suggests. Many key countries don’t yet have FTT campaigns, and we have come a long way in a year, so there is still a lot of scope to go further. Debt relief campaigners rightly point to the seven years it took to get from the Birmingham G7 summit to Gleneagles in 2005 where the debt wrote-off deal was effectively agreed. The Robin Hood Tax is gathering support far faster than that: campaigning should continue.