Financial transaction tax
These tended to lead to generally more complex schemes that were not implemented, in part due to lack of standardization of risk reporting under the Basel I framework, which was itself a response to the 1980s financial speculation crises.
"Academic studies (e.g. Bodnar et al, 1998) show that companies usually incorporate predictions of future price levels (i.e. a 'view') when executing hedges (a fact which will come as no surprise to most risk management practitioners).
"[25] To avoid this problem, most proposals emphasized taxing clearly speculative high-volume very-short-term (seconds to hours) transactions that could not in general reflect any change of fundamental exposure or cashflow expectation.
In this respect, Clinton was following the general 1990s trend to focus on automated transactions, in particular, those which could not reflect any genuine human-reviewed fundamental risk or hedge analysis.
[38] Fraser Reilly-King of Halifax Initiative also points out that the key issue and advantage of an FTT is its relatively superior functional ability to prevent tax evasion in the financial sector.
[4] In 1936 he proposed that a small tax should be levied on dealings on Wall Street, in the United States, where he argued that excessive speculation by uninformed financial traders increased volatility.
[4] Keynes writes: "The introduction of a substantial Government transfer tax on all transactions might prove the most serviceable reform available, to mitigate the predominance of speculation over enterprise in the United States.
On 19 September 2001, retired speculator George Soros put forward a proposal, issuing special drawing rights (SDR) that the rich countries would pledge for providing international assistance and the alleviation of poverty and other objectives.
Transactions made for its own account by non-resident taxpayers and by some financial institutions, such as banks, insurance companies, organizations for financing pensions (OFPs), or collective investment are exempted from the tax.
[45] In 1998 Colombia introduced a financial transaction tax of 0.2%,[46] covering all financial transactions including banknotes, promissory notes, processing of payments by way of telegraphic transfer, EFTPOS, internet banking or other means, bank drafts and bank cheques, money on term deposit, overdrafts, installment loans, documentary and standby letters of credit, guarantees, performance bonds, securities underwriting commitments and other forms of off balance sheet exposures, safekeeping of documents and other items in safe deposit boxes, currency exchange, sale, distribution or brokerage, with or without advice, unit trusts and similar financial products.
[45] Prime Minister Jyrki Katainen (National Coalition Party) decided that Finland will not join a group of eleven other European Union states that have signed up to be at the forefront of preparing a financial transaction tax in November 2012.
Supporters said: "We are delighted that the European FTT is moving from rhetoric to reality and will ensure banks pay for the damage they have caused; This shows it is possible to put the needs of the public over the profits of a privileged few.
[52] Listed shares acquired as of 1 January 2013 will no longer be subject to the sales tax; rather, any capital gains received will be added to the taxpayer's total income.
[9] In 2003 the Peruvian government introduced a 0.1% general financial transaction tax on all foreign currency-denominated incoming wire transfers regardless of their country of origin, to raise finance for the education sector.
Those investment services firms or credit institutions buying shares on their own account are taxable individuals, whereas the financial intermediaries involved in the transaction are substitute taxpayers.
To address the development of trades in uncertificated stock, the UK Finance Act 1986 introduced the Stamp Duty Reserve Tax (SDRT) at a rate of 0.5% on share purchases,[70] raising around €3.8bn per year, of which 40% is paid by foreign residents.
In other words, the tax applies to all companies which are headquartered in the UK,[45] albeit there is a relief for intermediaries (such as market makers and large banks that are members of a qualifying exchange) as a condition of their obligation to provide liquidity.
[80][81] Castro also suggested that the United Nations be the administrator of this tax, stating the following:May the tax suggested by Nobel Prize Laureate James Tobin be imposed in a reasonable and effective way on the current speculative operations accounting for trillions of US dollars every 24 hours, then the United Nations, which cannot go on depending on meager, inadequate, and belated donations and charities, will have one trillion US dollars annually to save and develop the world.
The proposal would affect a wide range of asset classes including the purchase and sale of stocks, bonds, commodities, unit trusts, mutual funds, and derivatives such as futures and options.
In that year, Nancy Pelosi, the speaker of the United States House of Representatives, as well as other Democratic members of Congress, endorsed a global (G20-wide) FTT, with the revenue raised in the U.S. to be directed to infrastructure, deficit reduction, and job creation.
[87] This proposal failed to win the support of the Obama administration, with Treasury Secretaries Timothy Geithner and Jacob Lew, as well as Larry Summers, opposing the idea.
The French study concluded that these volatility measures "are likely to underestimate the destabilizing role of security transactions since they – unlike large ticks – also reduce the stabilizing liquidity supply".
"[110]: 174 A Chinese study agrees, saying: "When it happens that an asset's price is currently misleading and is inconsistent with its intrinsic value, it would take longer to correct for the discrepancy because of the lack of enough transactions.
On the other hand, the case of UK stamp duty reserve tax shows that provided exemptions are given to market makers and banks, that FTT can generate modest revenues, at the expense of pensioners and savers.
[45] Kenneth Rogoff, Professor of Economics and Public Policy at Harvard University, and formerly Chief Economist at the IMF, argues that "Higher transactions taxes increase the cost of capital, ultimately lowering investment.
"[123] Nevertheless, in early December 2009, economist Stephany Griffith-Jones agreed that the "greater centralisation and automisation of the exchanges' and banks' clearing and settlements systems ... makes avoidance of payment more difficult and less desirable.
"[126] However, on 27 June 2010 at the 2010 G-20 Toronto summit, the G20 leaders declared that a "global tax" was no longer "on the table", but that individual countries will be able to decide whether to implement a levy against financial institutions to recoup billions of dollars in taxpayer-funded bailouts.
[145] David Harding, founder and CEO of one of London's biggest hedge funds has given qualified support for a European tax on financial transactions, breaking ranks with many of his peers fiercely opposed to such a measure.
[153] George Soros, put forward a different proposal, calling rich countries to donate their special drawing rights for the purpose of providing international assistance, without necessarily dismissing the Tobin tax idea.
"[179] A 2011 survey published by YouGov suggested that more than four out of five people in the UK, France, Germany, Spain and Italy thought the financial sector has a responsibility to help repair the damage caused by the economic crisis.
