Richard Curtis, Britain’s most successful comedy scriptwriter, wants to rebrand the Tobin Tax as the Robin Hood Tax, to take 0.05% from every international financial transaction and put it into a $400bn fund for, umm, good stuff like education, tackling poverty and climate change.
Nice rebranding: the opposite of the US estate tax or British inheritance tax being dubbed the death tax. Perhaps the same job could be done for income tax, to salve the consciences of payers: the “happiness levy”, perhaps.
But does it make sense? No. Is there one good thing about it? Not really: even the Bill Nighy video is disappointing.
Proponents think it would work by discouraging “excessive” trading, such as computer-driven rapid-fire share trades or the high volumes of speculative currency trading. There are a lot of smart supporters: Lord Turner, George Soros (who thinks it is unfair to tax retail sales but not capital flows) and Warren Buffett among them.
But large volumes of trading aren’t a problem, as long as they are adequately backed by capital (something currently being fixed, hopefully, in Basle), and as long as all the smart engineering PhDs in the world aren’t sucked into Wall Street (which could be fixed by reducing bank profits, through higher capital requirements and by forcing the banks to pay their true cost of capital). If there are profitable trades which do not provide any social benefit, as Lord Turner asserts, it is because the money is made available for the trades at below its true cost – so there is effectively a state subsidy. Don’t tax the trade: take away the subsidy, the state bail-out guarantee. Willem Buiter argued this at greater length a while ago.
On top of that, just because Gordon Brown and Nicolas Sarkozy agree it is a good idea, that don’t make it so – and it doesn’t make it possible to introduce internationally either, as Toby Young points out.
Even if it were somehow introduced internationally, how would the rate be set? Curtis suggests 0.05%, or 5c for every $100 trade – peanuts, he and Nighy imply. I don’t think it is peanuts (hence the vast sums raised), but even if it were, just look to Europe to see how taxes only go one way: up. You don’t have to be a right wing American to believe that the rate would be jacked up over time.
Finally, how is the money going to be spent?
The plan is for the US$400bn that could be generated by a global Robin Hood Tax to be split equally, with $200bn spent domestically and $200bn spent around the world.
Of the money spent globally, $100 billion would go towards international development and US$100 would support developing countries as they adapt to climate change.
The $200bn to be spent domestically would make serious inroads into tackling the structural factors that mean more than 13 million people in the UK live in poverty
Sounds great. Except, umm, why would the $200bn be available to the UK? Surely it would be divided between the whole world? Would Britain get half on the grounds that the City dominates foreign exchange, the biggest international market? No. How much would it get?
6.7bn people in the world, so $29 each (no, I didn’t do that in my head). Alternatively, if Britain tries to keep all the money, other countries are guaranteed to respond by cutting their “Robin Hood” rate, to attract the City’s business – it is highly mobile, after all. If all Britons get is $29 each, at the risk of destroying the City, that isn’t worth it. If there was a way to secure $200bn, or $3,278 each, that would be great – but there isn’t.
On top of that, the developing country and climate change money would be put in the hands of the UN. Yes, you heard right: the UN.
Funds would be managed by a UN mechanism, to ensure they are allocated fairly and according to each country’s particular needs.
Expect much corruption in a process overseen by the UN? Well, take a look at the UN-administered oil-for-food regime in Iraq, pre-invasion. According to the US DoD, there were $4.4bn of illegal surcharges (plus the smuggling). A Robin Hood Fund might be differently structured, but with many of its members cocking a snook at the rule of law, what chance would a UN fund have of staying corruption-free?
So far, Curtis doesn’t seem to be getting overwhelming support. After filtering out an attempt to fake massive no votes (ROFL, as geeks used to say), the results at 8.25pm were:
YES: 9850 votes
NO: 1846 votes
Given the amount of effort put into the campaign, that seems pretty disappointing for Curtis – but is good news for the financial system.