By: Priyanka Boghani
The Robin Hood Tax campaign is a movement brought together by 50 groups including Oxfam, World Development Movement, Trade Union Congress, UNICEF UK and War on Want. By taking an average of 0.05% from banking transactions, the movement is effectively campaigning for banks that caused the financial mess to pay to clean it up. It proposes that the revenue earned would be split between social welfare such as the NHS, funding international commitments such as the Millennium Development Goals and tackling climate change.
However, the proposal to tax bank transactions has been condemned by a leading expert on business taxation. "The Robin Hood Tax is a misnomer. Banks will pass the tax onto their customers and everybody in the economy will be indirectly affected. An increase in VAT rates, however, will raise large amounts of revenue effectively," said Michael Devereux, director at the Oxford University Centre for Business Taxation.
The tax derives from the Tobin Tax. Named after the American economist, James Tobin, the Tobin Tax is a tax on currency transactions devised in 1972. Unlike the Tobin tax, the Robin Hood Tax focuses on revenue generation rather than speculation.
A snapshot of today's public vote on the Robin Hood Tax website shows that 72,582 people have voted in favour of the Robin Hood Tax while 6,976 have voted against it. Despite recent allegations by the Robin Hood Tax campaign claiming that Goldman Sachs has rigged the internet poll with more 'no' votes, so far the tax has been popular with the public.
The campaign has gathered momentum, with world figures such as Gordon Brown, Angela Merkel, Nikolas Sarkozy, Joseph Stiglitz, Jesse Jackson and most recently, the Japanese foreign minister backing it. An estimated 17% of MPs are now in favour of the tax, the campaign reports, and an early day motions debate was scheduled at the House of Commons on 10 March about the Robin Hood Tax.
Julian Oram, head of policy at the World Development Movement charity argues that the tax would
discourage risky trading practices that have emerged over the last five years and reduce volatility in the markets. "The tax would be levied on all bank trades ranging from shares to foreign exchanges and derivatives to raise as much as 250 billion GBP a year. Although Obama's proposal to break up the banks could be an effective strategy, the Robin Hood Tax is more socially acceptable."
However, a London-based Goldman Sachs equity derivatives senior analyst does not see the Robin Hood Tax as a feasible or fair system. "The banking industry is not a charity fund", she said. "These large transactions boost the economy and incentives on them should not be lost. The 'super tax' should serve its purpose and is enough."
The 'super tax' in question is the tax issued by the government to stop banks from using profits to pay large bonuses to bankers. A one-off 50% tax rate on bonuses that exceed 25,000 GBP was enforced in the UK. However, financial transaction taxes have already been in existence at the national level in the UK. A 0.5% stamp duty on share transactions has been in force while the US has already implemented a small transaction tax to fund the Securities and Exchange Commission.
The British Banker's Association (BBA) has also questioned the proposed tax. "Banks would end up being collectors of this tax while customers will bear the cost of it. The campaign needs to outline how the Robin Hood Tax will not have an adverse affect on the economy", said BBA spokesperson, Brian Mairs. "At present, banks are already paying for what has happened with higher interest rates."
A World Economic Forum poll revealed that over two-thirds of people believe the current economic crisis is also a crisis of ethics and values. It points to a trust deficit regarding values in the business world. At the 40th World Economic Forum Annual Meeting in Davos last month, Josef Ackermann, chairman of the management board and the group executive committee of Deutsche Bank said, "If you have lost the trust of societies, you cannot respond technically, you have to respond morally."
The International Monetary Fund has confirmed that it will present a report on the options for recovering the costs of the public sector given to the banking sector including a financial transaction tax for the G20 meeting in June 2010.
With The Guardian's recent report on a 1% cap on public sector pay for two years proposed by chancellor Alistair Darling, Oram said, "The public sector is taking a real hit. It's time the finance industry acknowledges its social responsibility. If monitored by the G20 countries, the Robin Hood Tax is a quick win to solve the budget deficit."
In yesterday's budget report, Alistair Darling stated that he is backing such taxation on banks but stresses the need for global effort. He addressed a group of protestors who were clothed in the swashbuckling outlaw's outfit. The campaigners will protest through Westminster carrying letters to the chancellor on kick-starting an international agreement.
However, Devereux calls for a tax system where the cost of the tax is fairly distributed. He said, "If you want to tax banks so that they don't repeat the same mistakes that lead to the financial crisis, then a tax related to their indebtedness should be formed. Highly indebted banks should pay more tax than a less indebted bank. You can identify these banks by looking at the financial assets and liabilities of the banks." The debate continues.