Is a Tobin Tax ‘unworkable’?

Something of a bidding war is in progress to see who can propose the toughest measures aimed at bank profits/bonuses. The latest entrant is Lord Turner head of the Financial Services Authority, who, in an interview with Prospect magazine has argued in favour of governments levying a so-called ‘Tobin Tax’ on banking transactions. Given the likelihood of his departure and the sidelining of the FSA; Turner probably feels able to speak as he pleases pretty much and will not be bothered by the annoyance expressed by pretty much all politicians.

Nick Clegg thinks that such a tax is unworkable but shares Turners ‘sentiments’. Clegg is to a degree right that there would be serious questions marks over a ‘UK only’ bank tax but then again that wasn’t what Turner was proposing so it is something of a straw man that Clegg is arguing against. Turner proposes the measure as part of  “a very major reconstruct of the global financial regulatory system”. Given the fact that most global f9inancial transactions take place in only nine countries it would indeed be most effective if implemented by these nine. However, it is not entirely true that it is impossible to operate such a tax on a regional basis; the ‘Bank of the South’ in South America has implemented one recently and is using the monies raised for a development fund for the region. Meanwhile, the Canadian government passed a resolution in favour of the tax in 1999.

It is also true that such a tax would not be explicitly aimed at curbing bonuses though it is not unfair to assume that having to pay the tax in the first place would result naturally in lower bonuses being paid. At this point you being to suspect that there is less sympathy with the ‘sentiments’ than has been stated.  The tax could be set at a low rate and still raise billions in revenue which could either be reinvested in each economy or used to support developing economies. The real nail in the coffin of Clegg’s argument that it is ‘unworkable’ is supplied by none other than the City of London itself which reported that a simplified version of the tax was, in fact, workable.

A ‘Tobin Tax’ is not something that exists against or in opposition to measures to ‘break-up’ High Street banks or indeed Vince Cable’s recently proposed high-pay commission. It is in fact, as Turner rightly says, part of the major restructuring that needs to take place following the latest ‘crash and burn’ of the global economy.

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About darrellgoodliffe

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9 responses to “Is a Tobin Tax ‘unworkable’?”

  1. 16sd says :

    I have not read about this proposed tax in detail, but it sounds like it will do more harm than good.

    Thom Clarke’s Poll Booth is something I have been invited to. He told me months ago the site would be up and running soon, but I do not think there has been any noticeable development.

    My website: http://www.samsondada.com/articles

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  2. Darrell says :

    16sd,

    Well I think the reverse. I think it would provide a useful pot of money in these lean times and would also see the rush for profit culture curtailed in the financial industries. So, all in all, I think it is a good thing.

    I was also invited and agree that it has not developed.

    Darrell

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  3. Joe Otten says :

    The report you link to by an NGO (not by the “City of London” itself) proposes a worldwide tax on Sterling transactions, not a UK tax on all currency transactions.

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  4. darrellgoodliffe says :

    Joe,

    The think tank that actually authored the report is a City-based one too and while what you say is true that and the other points I make do not detract from them being blows against what Clegg says. Once again poverty of ambition rules the roost.

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  5. Joe Otten says :

    Treating an impractical proposal as practical just because you want it to be practical – or because it presses the right emotional buttons – represents not a wealth of ambition but a poverty of clear thinking.

    Now maybe the Tobin tax is a good idea – it surely can’t be as bad as income tax or VAT after all – but it is rather cheap of you to jump to conclusions and then attack the motives of anybody who disagrees. Rather, you might make the case for the workability of the measure.

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  6. darrellgoodliffe says :

    Joe,

    I think I have provided clear citation for what I say above and do not intend to repeat myself. The evidence is not as Clegg presents it; indeed, it would seem to me that the clear burden of proof falls upon him to justify his ‘unworkable’ comment.

    I think the motivations are quite clear; they are the same they were for keeping quiet over Al Megrahi, for ‘towing the line’ on Afghanistan, the same they are for what James Graham rightly calls an obsession with spending cuts….a very obvious pattern is developing to my mind.

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  7. Jon says :

    This was a very informative article. I’m glad to have stumbled upon it. I hope you keep them coming. It’s always nice when people take their time to contribute information such as this. Is there a way to subscribe to future postings?

    As far as the new proposed tax. I say to the government. Keep your hand out of my pocket. I dont use social programs, I work and dont appreciate having to pay additional taxes every year to subsidize government projects and people who have leaning on the government for support down to an artform.

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  8. darrellgoodliffe says :

    Jon,

    Glad you enjoyed the article and thank you kindly for what you said 🙂 I will do my best 🙂 I believe you can subscribe to an RSS feed using the buttons over there ________>

    I think the point Jon is that this tax would not be the government dipping into your pocket (unless your a stockbroker) since it would be on financial transactions so I dont think your point is totally relevant here. Regardless, I do have to say that those people you talk about are a crushing minority on benefits (most of them do want to work like yourself and it is hardly a cushy existence) and that of course it is right that the government provides for people in times of need through benefits.

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  1. Clegg: Turner’s bank tax is “unworkable” - August 28, 2009

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