Wednesday, 10 March 2010

The 'Robin Hood' Tax revisited

Faced with these proposals, anyone who has read Atlas Shrugged cannot help but recall the words of Ragnar Danneskjöld:
It is said that [Robin Hood] fought against the looting rulers and returned the loot to those who had been robbed, but that is not the meaning of the legend which has survived. He is remembered, not as a champion of property, but as a champion of need, not as a defender of the robbed, but as a provider of the poor. He is held to be the first man who assumed a halo of virtue by practicing charity with wealth which he did not own, by giving away goods which he had not produced, by making others pay for the luxury of his pity.
Until men learn that of all human symbols, Robin Hood is the most immoral and the most contemptible, there will be no way for mankind to survive
Last month I highlighted James Tyler's critique of the Luvvie/Tobin Tax, which has been rebranded the Robin Hood Tax, and promoted by Gordon Brown, Angela Merkel, Nicolas Sarkozy, and Bill Nighy.

According to its proponents,
The Robin Hood Tax is a tiny tax on bankers that would raise billions to tackle poverty and climate change, at home and abroad.

By taking an average of 0.05% from speculative banking transactions, hundreds of billions of pounds would be raised every year.
Today, Daniel Hannan reports that
As predicted, the European Parliament has voted for a tax on financial transactions, to be levied directly by Brussels. The vote went through by 536 to 80...
Hannan earlier noted that "the case for a small levy on financial transactions is not intrinsically absurd: an argument can be made either way", but Tyler's concerns about the impact are plausible:
It is said that the market will absorb the Tobin/Hood/Luvvie tax. Anyone who says this clearly underestimates the ability of a bank to pass on its increased costs. You will either pay directly by higher fees, or indirectly, as the cost of everyday things get more expensive.
But surely a tiny transactional tax would pass unnoticed? Well, it may seem tiny, but to many market participants this Luvvie tax will be huge. What people fail to understand is that a regular and competitive price in many instruments come from institutions that are prepared to turn over huge volumes in order to make a net margin often much smaller than the Luvvie tax. In one fell swoop, you make a huge proportion of this trading unprofitable, therefore you take away the ability of the market to provide a price. It’s always the way of ill thought out taxes: unintended consequences. Some arbitrary decision is made, and a myriad of economic activity suddenly becomes futile.
But even if Tyler is wrong, and the market would absorb this tax, the proposal remains concerning for a number of reasons.

As Hannan has noted, a regional tax would "simply drive business away from the EU". The Robin Hood Tax campaigners acknowledge that the tax "requires co-ordinated implementation by the G20 countries, or at least the G8", but this notion is laughable — such cooperation would be vanishingly unlikely, and it would be insufficient in any case. According to Z/Yen, the world's top 10 financial centres in September 2009 were:
  1. London
  2. New York
  3. Hong Kong
  4. Singapore
  5. Shenzhen
  6. Zurich
  7. Tokyo
  8. Chicago
  9. Geneva
  10. Shanghai
It is not difficult to imagine Obama joining the Merry Men; the EU have surprised nobody by declaring their support; and the Telegraph reports that Katsuya Okada — "wide favourite" to be Japan's next Prime Minister — has given the idea his backing. But that leaves Hong Kong, Singapore, Shenzhen, Zurich, Geneva, and Shanghai. Can anyone imagine the Chinese and the Swiss signing up to this?

The implementation of the Robin Hood Tax would devastate New York, London, and Tokyo, but the revenue would dry up as the financial industry shifts operations to friendlier countries.

This on its own should be enough to stop the idea in its tracks, but how many critical observers would still claim that our governments act to promote our long-term prosperity? On the contrary, we can expect socialists on both sides of the Atlantic to continue on their current path, confiscating wealth and consolidating power, heedless of the eventual consequences for the hapless masses.

We need only examine the plans that proponents have for their plunder. The windfall would not go on clearing our national debt, settling our pensions liabilities, or investing in infrastructure and scientific research. Instead it is intended to "generate money to bring about social change and tackle climate change".

The supporters page for the Robin Hood Tax campaign reads like a who's who of Fake Charities. The list includes
There is no doubt that most of the people who support the Robin Hood Tax do so from the best intentions, but they do not recognise the evil of practising charity with other people's money, and they fail to identify the chief beneficiary of such schemes.

It is not the long-suffering African who will reap the rewards, but rather what Rand calls "this foulest of creatures — the double-parasite who lives on the sores of the poor and the blood of the rich", the "mediocrity who, unable to make his own living, had demanded the power to dispose of the property of his betters, by proclaiming his willingness to devote his life to his inferiors".

Our financial system is fundamentally flawed, but the Establishment shows no interest in reforming it. They do not want to close the casino; they are content to take their cut.

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