Transcript Where we are at

Financial Transactions Taxes:
Feasible, Desirable, Powerful
David Hillman
Director
Innovative Financing Pathways

Voluntary: such as lotteries, Product Red

Borrowing/debt-based mechanisms: specialised bonds 
International Finance Facility for Immunisation (IFFim)  GAVI
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State subsidy: such as Advanced Market Commitments
(AMCs)
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Solidarity levies: micro-taxes on globalised activities such as
aviation/maritime transport, finance
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Example: Air passenger duties  UNITAID
Pilot project: proof of concept for larger initiative: FTTs
FTT - characteristics
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Taxing financial transactions, such as: stocks, bonds,
derivatives – trades carried out in volume by finance firms,
rather than individuals (tax does not fall on ordinary people)

Simple/inexpensive to collect – markets automated, very
difficult to avoid – tax deducted at point of settlement

Avoiding AVOIDANCE: employ capturing principles such as
‘Ownership’: if you don’t pay the tax, you don’t own what you
bought – this makes not paying the tax simply not worth the risk

Low rates/substantial revenue: example = 10 European
countries progressing now – FTTs on various assets at fractions of
1% (0.01% - 0.1%) – up to 30 billion euro can be raised a year

Spending: we propose 50% spent domestically to
protect/create jobs; 50% internationally: development/health
(25%) + combatting climate change (25%)
FTT - characteristics

Taxing financial transactions, such as: stocks, bonds,
derivatives – trades carried out in volume by finance firms,
rather than individuals (tax does not fall on ordinary people)

Simple/inexpensive to collect – markets automated, very
difficult to avoid – tax deducted at point of settlement

Avoiding AVOIDANCE: employ capturing principles such as
‘Ownership’: if you don’t pay the tax, you don’t own what you
bought – this makes not paying the tax simply not worth the risk

Low rates/substantial revenue: example = 10 European
countries progressing now – FTTs on various assets at fractions of
1% (0.01% - 0.1%) – up to 30 billion euro can be raised a year

Spending: we propose 50% spent domestically to
protect/create jobs; 50% internationally: development/health
(25%) + combatting climate change (25%)
History and practice

Heritage and provenance – Stamp Duty (early version of
FTT) pre-dates income tax (1690ies). FTTs appear in John
Maynard Keynes (General Theory) + James Tobin (US
Nobel prize-winning economist)

Not radical but mainstream – many FTTs exist
already: more than 40 countries have implemented FTTs in
the past decades either permanently or temporarily
Examples include:
UK raises $4.7 bn. a year from 0.5% tax on share
transactions(£3.1 bn.)
US raises $1 bn. a year – section 31 fees pays for SEC
Brazil raises $10 bn. a year from a variety of FTTs
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Myth-busting
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MYTH: it won’t work because all countries need to
implement FTTs at the same time, or they will be
avoided by moving trading to a country that does not
have FTTs – this is a favourite scare-monger tactic of the
financial sector
REPLY:
This flies in the face of the evidence – many, many FTTs
(as stated) already exist – they are successful and raise
considerable revenue for governments. Every single one
has been introduced unilaterally. The key point is
‘design’
– if FTTs are designed properly then companies cannot avoid
them by re-locating their financial trading
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Desirability of FTT - 3 motivations
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1) Transparency – greater taxation of the sector will lead to
greater oversight for financial authorities – of great benefit in this
current climate of clamping down on tax avoidance

2) Stability – the FTT will ‘throw sand in the wheels’ of
financial trading. This will benefit more traditional ‘buy and hold’
strategies of investment and mitigate against the ‘get-richquick’ casino approach – particularly reducing the destabilising
practice of High Frequency Trading. The FTT is viewed by many
economists as good for incentivising long-term investment
over short-term
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3) Revenue – it is a proven way to raise substantial revenue
from a sector that clearly afford it:
witness the levels of remuneration/bonus they pay
Progress
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European progress – Germany, France, Italy and Spain + 7
other countries are in final stages of negotiations for FTTs on
shares and derivatives. ECOFIN last week produced details of deal
expected in June 2016.
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Urgent need for climate finance, ‘additional’ to development
finance – new money needed to pay for ‘adaptation’ and
‘mitigation’. This needs to be ‘in addition’ to Official Development
Assistance (ODA) or it will effectively lead to a reduction of
traditional aid.
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Predictable and substantial: FTTs can generate substantial,
revenue on a predictable basis – France leading on allocation
of significant part of their forthcoming FTT revenue to finance
to combat climate change  Sapin statement
Potential
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Modern campaigning work on the FTT to bridge the funding
gap to meet Development Goals started with potential of
micro-tax on currency transactions
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Important logic that a business that is by its very nature
international – foreign exchange – should be harnessed so
that funds can be generated to pay for people’s needs
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Size of today’s foreign exchange market: $5.3 trillion pd:
$5,300,000,000,000
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Per year: $1,325,000,000,000,000
Conclusion
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Critics accuse FTT of being an unworkable, radical
idea, when it is the opposite: proven and effective – in
fact, mainstream – Bill Gates, for instance, is in favour of it

The substantial money it would raise can make an
enormous difference protecting livelihoods at home and
saving lives abroad – for instance, contributing to the
end of AIDS
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At the end of the day, what’s not to like!