Financial Transactions aka “Robin Hood” tax campaign
This morning Oxfam launched their “Robin Hood” (financial transactions) tax campaign in Canada with a press conference in Ottawa and the launch of their website. Â
Together with Oxfam officials, I spoke in favour of the tax from an economics perspective and Dale Marshall from the David Suzuki Foundation talked about how revenue raised from it should be used to help fund climate change programs.
Estimates are that an international financial transactions tax at a rate of 0.05% could raise up to $600 billion a year and the Robin Hood tax campaign proposes that a quarter of this goes to fund Millenium Development goals and another quarter goes to support for international climate change programs.
This campaign is leading up to the G20 meetings in Toronto this June and is part of an international campaign for an international financial transactions tax.    There are some really good videos and more background information on the UK website. The Centre for Economic Policy and Research in the US also has some good material on their site.
The issue may not have received much attention in Canada, but it is a much bigger issue in other countries.  On Sunday, British PM Gordon Brown just re-iterated his call for a global financial levy.  Sarkozy and Merkel and Nancy Pelosi have recently both called for an international transactions tax, as did Larry Summers a number of years ago.Â
Hundreds of economists have signed a letter calling on G20 leaders to introduce a financial transactions tax and it has also been supported by Paul Krugman, Jospeh Stiglitz, Simon Johnson and other notable economists.
The IMF has prepared a report on options for a tax on banks or a bank levy that will go to G20 Finance Ministers at their meeting this Friday in Washington.  The first focus is on some sort of bank levy insurance scheme for failing banks and to pay for some of the costs of the crisis, but they have also been studying the issue of a financial transactions tax and that will presumably come up for discussion in June.  I don’t think many expect endorsement of a FTT from the IMF, but some sort of levy on banks would be a first step.Â
Unfortunately, the most outspoken opponent of any sort of tax or levy on banks is Canada’s Finance Minister Jim Flaherty who flatly refused to support it back in February.  Last week he sent a letter to G20 Finance Ministers calling instead for a market based solution requiring banks to have “contingent capital” for their subordinated debt (debt that turns into equity given some trigger).  This is clearly a diversionary tactic.   Many commentators in the Financial Times quite rightly have said that contingent capital schemes would probably lead to greater instability and not less.
More pressure needs to be put on Flaherty to stop obstructing progress in this area.  Some opposition parties in Ottawa seem to be warming up to this. The Halifax Initiative has an open letter from economists for people to sign on.
As most know this idea has been around for quite awhile, and I am quite happy to see it actually get some consideration, given the crisis and the wild speculation that was ultimately at the center of the financial supernova. Potentially some leaders were starring too long long at the former sun (and growing again) of the financial sector, wild speculation, and became suddenly policy blind. Or alternatively in Canada’s case, the policy makers are in deeply entrenched with the power brokers and run missions for them such as the derailing Flaherty will carry out at the upcoming G20. I was going to use a Mission Impossible analogy, but in reality it will be Mission Impossible for the reformers side with the Robin Hood tax. If you see Peter Graves at the G20, be assured he will be busy and most likely very dead.
It does beg the question, it seems as though those Wall Street and Bay Street wizards feel that the way forward is to have at the heart of our financial system wild speculation. Who would have thought it that somehow rationally trained “risk takers” of the stalwart Neo-Classically economic schools would want to keep the rotting carcass of a system that allows handfuls of individuals to take other peoples money, bet/trade/borrow/ horde information/ and inside trade/ and apparently “risk take”, to somehow transform this into more wealth on a stage of hyper leveraged permutations and combinations of derivative trading/ data mining algorithms that have been proven to crash and lock up credit markets- causing the biggest crash in financial value- (of other peoples money) since the great depression, which in turn leads to the great recession that trillions are spent to bail out banks and restart the economy that unleashed an unaccountable interrelated death/poverty/destruction/ ratcheting down of living standards/ etc.
What beast would somehow try and derail a cause that would try and fix the system.
Is it me or is it the center of the financial hub not wanting to give up its culturally accepted globalized money printing press that apparently the recession and crisis is now being popularly historically down graded as a bit of a hiccup. Amazing how the press has been cranking out stories that the whole crisis was all just overstated and hyped. Google it and see history being revised!
It simply is an amazing feat the financial community just pulled off over the last 3 years and even made billions off of, and to make it worse, the government hired and paid the industries own fire fighters. (Hank Paulson and crew).
And we at the working class level, seem to be just as addicted to the money printing press at the center, as our pensions and savings get wrapped up into it. Unfortunately is is our assets that get pillaged and then we are handed the bill for the clean up. How much wealth is there to be tossed around with such utter disregard for socially determined goals other than personal gain. How much, surplus is there? We all know what happened on Easter Island, apparently we need more Wooden head monuments and we need to cut the last remaining trees but how will we fish when it all comes crashing down again. Damn we are most likely more socially and culturally out of control than the Easter Islanders.
pt
Letter to Editor
Robin Hood tax would raise $700 million a year from bank transactions: activists, Heather Scoffield, The Canadian Press
http://bit.ly/RobinHoodTx
In rejecting opposition pleas for the Robin Hood tax, Finance Minister Jim Flaherty maintains that no Canadian taxpayer money has had to be put into our banking system. Flaherty fails to mention that under the Insured Mortgage Purchase Program (IMPP) and the Extraordinary Financing Framework (EFF), the government is forecasting the purchase of $275 billion dollars of financial assets to help the financial sector overcome its liquidity problems, the final cost of which to Canadian taxpayers has yet to be determined.
Should anyone be curious to know why banks pay no taxes on their financial transactions whereas you pay tax on your purchases of goods and services, and why the banks get direct government help with their liquidity problems whereas you get little such help with yours, remember that it’s just another example of Canada’s Golden Rule: He who has the gold makes the rules.
Larry Kazdan C.G.A.
Vancouver, B.C.
excellent points Larry
It does make you wonder how the banks were able to fence in that goose for all these years.
I still think we need to have some kind of parliamentary committee look into who the financial sector in Canada operated through the financial crisis. We need to ensure, in a public space, that whatever went on with some of the programs you mentioned and the key participants, was enough to allow protection of our financial system for future meltdowns. Regardless of how much the banks say they weathered the storm, we all know that it had nothing to do with the current Harper govt, in fact he was the one considering even more exposure to the banks to the American system.
So I think it is time that we not only insist that our government consider more regulation, and instead of hijacking the international efforts, they start be ensuring our own system is not geared towards rewarding those who can bring the house down. We need to have a full disclosure and investigation into exactly what happened during the crisis and if there was a meltdown in Canada who would be bailing out the banks. It is at the heart of what is being considered at the G20 as we any rational representative knows, the public cannot be called upon again to bail out the global financial system.
And despite all the claims by the Canadian financial sector, I am sure it was not a rose garden that we were walking amongst at the height of the crisis.
Especially given the limited abilities of the sectors watchdog’s and the lack of power the SEC has in Canada compared to other countries. We may have more bank regulation, but we have a lot less protection when it comes to policing the financial community.
pt.
For those who are interested, the IMF’s report was leaked to the BBC and is available on-line at:
http://news.bbc.co.uk/2/shared/bsp/hi/pdfs/2010_04_20_imf_g20_interim_report.pdf
Comment to Larry Kazdan:
Under the Insured Mortgage Purchase Program the federal government engineered a complicated asset swap of about $100 billion which ended up with the banks holding $100 billion of federal government bonds, and the CMHC, a federal government agency, taking over $100 billion of mortgages previously held by the banks. This is what is termed ”credit easing”. The net debt of the government did not increase but its gross debt did: the quantity of federal outstanding bonds.
It is ironic that now the Conservative government and its allies are using gross debt phobia to justify cutting back on social programs (eventually) when a substantial proportion of the gross debt was incurred to support the banking system and didn’t even incur an increase in net debt! What is shocking is the rapid Conservative response to bankers’ needs but its lack of help for other Canadians, especially the 1.5 million unemployed and people saving for retirement.
It is true Canadian banks weathered the financial storm well without the need for government capital injections. This was due to a combination of their oligopolistic control of the Canadian financial system and the accompanying high and secure profits, conservative practices and better government regulation. One could argue that oligopoly lead to conservative practices (why do risky things when you can make a fortune just taking deposits and lending money) and an acceptance of regulation to keep competition from getting out of hand. Actually this may not be a bad thing but it does require strict regulation of fees and other costs for consumers as price competition is largely non-existent.
The leaked IMF report is well worth a read. Their proposal for a Financial Activities Tax to be levied on financial sector rents could go a long way to meet the goal of raising revenue from a bloated financial sector, though it leaves the work of reigning in dangerous speculation to regulators. They also call for some kind of levy to build up a fund to finance future bail outs.
I’d like to see this rate set high. I’d also like to see the most wealthy members of society pay tax (currently virtually none do and if they do they pay less tax than a single mother).