Thursday, September 17, 2009

A tax to help the poor

French Foreign Minister Bernard Kouchner has an article in today's Financial Times calling for adoption of a financial transaction tax. This comes hot on the heels of a similar call from the chairman of the UK Financial Services Authority, Lord Turner, who earlier this month suggested that an FTT would play a useful part, alongside other measures, in combating the destabilising effects of excessive speculative activity.

These calls are timely and appropriate. Just months after the near total collapse of the financial system, the speculators are back with a vengeance. Worse still, taxpayers around the world have to carry the cost of the past excesses of the financial innovators. Even set at a modest rate, an FTT would throw sand in the cogs of market traders, who often speculate on tiny movements. It is also an easy tax to collect and not so easy to avoid. In other words, a good tax. And if the proceeds could be disbursed via controlled and audited processes to assist with poverty alleviation, as Kouchner suggest, then we might at last be able to see the elusive silver lining to the dark cloud hanging over the world's poorest people.


Blogger Physiocrat said...

It is not clear what exactly would be taxed, but why should legitimate foreign exchange transactions be taxed? It will just interfere with foreign trade, put up the costs of just about everything in the shops and put some people out of work, but not the parasites against whom the tax is targeted.

Where is the moral principle behind this proposal? And how exactly would any revenue the tax might raised be used in a way that would result in the poor actually being any better off?

The proposal is nothing more than an emotional response to recent excesses, which are themselves effects rather than causes.

11:28 am  
Anonymous TJN said...

Well, first, look at the tax that's proposed. Kouchner proposes a tax of 0.005%, which is in the range that several others have suggested it. Please explain how that will interfere with foreign trade. Much of the morality behind taxation stems from its practical effects. The point about whether the revenue raised would make the poor worse off is a perfectly legitimate question, from a spending point of view, but from a revenue and behaviour-affecting point of view - if the tax is well applied, then its "sand in the wheels" aspect is potentially a very powerful one, helping curb massive instability. And as for the practical effects, well, some of them were explained here.
or you might look at this section of the original Tobin report, outlined here

And it is not at all clear why somethign that was proposed in 1978, and has been on a slow burn ever since, constitutes an "emotional response."

12:42 am  
Anonymous Anonymous said...

So it won't interfere with foreign trade, but it will put sand in the wheels of foreign financial transactions. No disconnect here.

Has anyone stopped to even consider the fact that we have never had an international tax before? Why should a free nation subject their people to the taxing authority of a body not subject to our Constitution?

What's next after an international poor tax? An international environmental tax? International meat consumers tax? International racism tax? International capitalism tax?

7:30 am  
Anonymous TJN said...

"So it won't interfere with foreign trade, but it will put sand in the wheels of foreign financial transactions. No disconnect here."

No. Finance and trade overlap, but they aren't the same thing. As John Maynard Keynes, a supporter of trade, put it:

"above all, let finance be primarily national."

An international environmental tax - many serious people who have studied climate change and have worked through the implications would strongly support such a thing. But an international capitalism tax? That's just silly.

7:43 am  

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