[OPE] The limp finale of the Tobin tax

The Tobin Tax used to be a centrepiece of the whacky ATTAC program, until it
went mainstream in the course of the slump. I wrote about the Tobin Tax on
OPE-L 23 March 2007. I said, the Tobin tax "is unlikely to be a winner".

It looks like I am correct, although a few more additional reasons have
recently been mentioned for why such a tax is unlikely to be implemented.

Britain and Sweden's governments in particular had opposed such a tax, while
France and Germany's governments supported it.

The Dutch newspaper Volkskrant (2 Sept 2010) now reports that the EU thinks
the proposed tax on financial transactions is hardly feasible. According to
a "confidential" report by the European Commission, which will be discussed
next Tuesday by the EU finance ministers, practical and legal problems make
it uncertain that the state would receive sufficient net income from it, and
guarantee that banks and funds would behave less speculatively. Eight
arguments against the transaction tax include:

- that the tax would have to be levied not just on speculative activity, but
also on "legitimate" transactions by pension funds and governments (level
playing field idea?).
- it would raise the cost of credit, and and by implication raise prices.
- financial institutions would simply shift their speculative operations
abroad.
- the complexity of transactions makes implementing and enforcing the tax
difficult.
- the tax would interfere with the neoliberal principle of the free movement
of capital.
- the total yield of the tax, as against collection costs, is uncertain and
cannot be reliably estimated.
- tax revenues would be unequally distributed; Britain, a world financial
centre, would get 70% of them, while other EU countries would be financing
the tax collection.
- a more effective method would be a levy on the income from financial
activities, but it is a 'blunt instrument', that would also raise the cost
of credit and lead to new kinds of tax evasion.

As I mentioned in my posts on regulationism, the main idea of the
bourgeoisie is that if the financial institutions took a big financial
knocking as a result of investments which were too risky ("wrongly pricing
risk") then they will think twice about doing stuff like that again.
Likewise, consumers will think twice again about taking on dodgy loans. And
therefore the idea is, that you really don't need so much extra regulation,
because people will regulate themselves. This is itself a dodgy idea
however, because it neatly displaces the issue - that the financial burden
of the slump is shifted to those least able to evade it. You guessed it, the
workers.

J.

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Received on Thu Sep 2 18:33:42 2010