Tuesday, 19 April 2011

Has the time come?

"In 1816, the British parliament repealed the temporary income tax that William Pitt the Younger had introduced in 1789 to finance the Napoleonic war. The MPs hated the tax so much that they even agreed that all documents connected with it should be collected, cut into pieces and pulped.

When the income tax was reintroduced in Britain in 1842 by Robert Peel, everyone considered it a temporary measure to replenish the depleted exchequer. But despite generations of politicians after Peel promising to abolish it, the tax never went away.

It proved impossible to abandon a tax whose time had come".
You can read the rest of yesterday's Guardian website article by Ha-Joon Chang and Duncan Green - entitled Robin Hood: A tax whose time has come - here (Hat tip to Paul Hunt for the link).

1,000 economists from 53 countries have signed a letter in advance of the G20 calling for a Robin Hood tax (aka Tobin Tax). Irish signatories include TASC economist (and PE blogger) Tom McDonnell, TASC Economists' Network chair (and ICTU economic adviser) Paul Sweeney, and EN members Terrence McDonough, David Jacobson and Marie Sherlock.


Paul Hunt said...

Thanks, Tom, (assuming it is you) for running with this. The European Financial Stability Board:
seems to be getting stuck into many issues around this - even if there is no formal support for the FTT. The next bubble is emerging in commodity markets - in particular, oil - where so much 'paper' trading is taking place, the underlying asset or commodity markets are thin and market players and price reporters are applying prices in the 'paper' market to prices in the underlying - without any relationship to supply and demand fundamntals in the underlying markets.

Many 'physical' players, who, previously used the 'paper' market for legitimate risk management services, have simply given up on it. The problem, again, is excess liquidity (fuelled by Fed and BoE QE), excessive leverage, underpricing of risk and chasing yield. Governments and regulators will have to limit the number of OTC and exchange-based paper products, impose higher capital requirements, banish 'naked' trades, insist on exchange-based settlement of all products and actually tighten monetary policy.

Ireland cannot probably do much on its own, but it should be prepared to give wholehearted support to any developments along these lines - and those advanced by Ha-joon Chang.

Tomboktu said...

"even if there is no formal support for the FTT"

Well, not quite. The European Parliament, the only direct democratic institution in the EU's governance mechanism, voted in favour of a FTT in the last few weeks. That's formal in my mind.