Whatever happened to Robin Hood? Update on the Financial Transaction Tax
From deep inside the boilerhouse of the Robin Hood Tax campaign, this helpful update comes from Max Lawson, Oxfam’s man in the green mask…..
The weeks up to the G20 Finance Ministers meeting in Washington DC on 23 April (on the margins of the IMF and World Bank Spring Meetings) and the UK election (almost certainly on 6 May) will determine whether there will be a tax on banks which delivers money for good causes, and whether the idea of a tax on transactions continues to gain momentum. The chances of success and failure seem evenly poised, and will depend in part on the success of public campaigning on the issue.
Momentum is gathering pace for a tax on banks to be agreed by the G20, but this is not the same as the Robin Hood Tax – this tax would not be on financial transactions but on bank assets, and so far is only targeted at paying the costs of bank bailouts. The serious risk is that the bank tax will be kept relatively small and will not raise any money for good causes at home or abroad. At the same time the political space for a more substantial tax on financial transactions could be closed down by the move.
Success by May would be either a group of key countries (France, UK, Germany, US) or the whole G20 agree an Obama-style bank levy and that a substantial proportion of this goes to fight poverty and climate change. At the same time the IMF concludes that financial transaction taxes are possible and should also be taken forward, and the French and Koreans agree to continue to press for an FTT during their G20 presidencies.
In the UK the main parties have begun to compete over how and in what ways they are going to tax the banks – a campaigner’s dream! The Conservative opposition announced that if elected they would implement a tax on banks unilaterally, albeit at a smaller rate than if it was global. This brings them into line with the other major party, the Liberal Democrats. This sadly led the ruling Labour party to try and outflank the opposition on the right, by instead saying that only a global agreement would count, and that the Conservatives by pushing unilateral approaches could risk jobs in the city.
At the same time there was minimal mention by any party of linking the bank levy to good causes, and no mention of this in last week’s UK budget.
In quick succession this week the German and then the French finance ministers both came out in favour of an Obama style tax on bank assets to raise money for protection against future bailouts. The Germans said their levy will raise 1billion euro, adding that though would have preferred a transaction tax, this had to be global and there was no appetite to do this ‘as the moment’.
French finance minister Christine Lagarde predicted fast agreement on a bank levy, and added that both a bank levy and an FTT could happen: ‘They are not necessarily mutually exclusive, but the one that is likely to progress fast is the levy on banks, rather than the financial transaction tax’.
At their meeting on Thursday 25th March, European Leaders said the following in their communiqué:
“Rapid progress is required on the strengthening of financial regulation and supervision both within the EU and in international fora such as the G20, while ensuring a level-playing field at the global level. Progress is particularly needed on issues such as capital requirements; systemic institutions; financing instruments for crisis management; increasing transparency on derivative markets and considering specific measures in relation to sovereign credit default swaps; and implementation of internationally agreed principles for bonuses in the financial services sector. The Commission will shortly present a report on possible innovative sources of financing such as a global levy on financial transactions.”
The next step in Europe is the emergency finance ministers meeting in Madrid on 15th and 16th of April, where the bank tax and the FTT will be discussed.
Outside of the G7, other G20 countries remain largely observers on this topic, although there was some talk of China setting a currency transaction tax (one particular kind of FTT) in place at a zero rate to deter speculators.
The IMF study, mandated by the G20 in Pittsburgh, (see previous post) remains keenly awaited and is due out on 23rd April. Whilst the tax on assets at a small rate is likely to be the favoured option, there remains a good chance that the IMF will give transactions taxes a fair hearing and conclude that they too are technically feasible given political will.
Meanwhile FTT campaigns are growing globally. Campaigns have been running in Germany and other European countries for some months. In Germany the campaign is called the Tax Against Poverty (Steuer gegen Armut) and they have their own version of the Richard Curtis-Bill Nighy film (included below yet again, just because it’s so brilliant). Supporters in the US have been pushing for action in Congress and the White House, as well as protesting outside banks all over the USA, and are planning a mid-April campaign launch. The Italians launched their zero-zero-cinque campaign last week and other campaign launches are being planned in Australia, France and many other countries.
It’s fascinating watching the chance for this kind of major policy shift open up in response to a shock, and the combination of forces – public campaigning, research, politicians looking for answers, blockers, sceptics etc swirling around the issue and determining the outcome. A little bit of history is playing out before our eyes on this one.