Rob’in the Banks

Issue 67 April 2010

Personal banker, Taimoor Mirza sheds light on the Robin Hood Tax scheme, a campaign launched to tackle the effects of the financial crisis. 

The Robin Hood Tax campaign has been launched by a host of organisations including Action Aid, Comic Relief and Oxfam in order to combat poverty in the UK and overseas, as well as other issues.

 The idea is to impose a minute percentage tax (0.05% on average) on financial banking transactions, which in turn would help raise billions to tackle social issues such as poverty, climate change and education both domestically and internationally.

 In order to work, the scheme needs to be implemented globally and would tax entities like stocks, bonds and the foreign exchange. It will not tax retail banking and thus will have no affect on personal banking. This means an individual’s personal monies and transactions will not be affected, nor will the scheme seek to tax mortgages or pensions.

 Even though the tax is minute, it has the potential to raise $400 billion globally per annum. Tax will vary from 0.05% - 0.005% depending on the nature of the transaction.

How will the money be spent?

The fund would need to be split equally; half spent domestically and the rest internationally. Of the money dispersed globally, half would go towards international development and the other half would support developing countries as they attempt to adapt to climate change. It can also be used to help fight diseases and illness such as AIDs, malaria and tuberculosis. The money spent domestically would go towards the welfare system and improving public services, whilst also investing in affordable housing and tackling climate issues by making homes more energy efficient.

 The funds would be managed by a UN mechanism, to ensure they are allocated fairly and according to each country’s particular needs. The stakeholders involved would have to take decisions jointly regarding the collection and distribution of funds (with the revenue spent according to developing countries’ own poverty reduction priorities and according to the Paris Principles on Aid Effectiveness). The $100billion for climate change would go a long way towards the $500 billion needed annually to help developing countries adapt to, and prepare for, climate change for example.

 In order to come into force, the scheme will need the support and backing of the world’s largest economies and in particular the G8 nations. Britain, France and Germany have already called for some form of a transaction tax to be implemented on the banking industry, but they have not yet identified a concrete solution.

 The million dollar question stands: should the scheme be implemented? Still in its early stages, the scheme definitely requires some serious debate and thought. The idea is good, but there can be issues in implementation. In an economic climate where we are only just starting to recover from a great recession, is $400 billion an amount that we can afford to reallocate?

 In order for the scheme to be implemented and appease the powers that be, it must be proven that its introduction would not have a detrimental effect on the global economy.

What are the advantages?

• It would appease the public who are disillusioned with the fact that the banks have been bailed out yet they continue to pay high bonuses.

• It is supported by many charities.

• The idea of the scheme itself has come from good intentions and is, essentially, a move for humanity.

• It would help fill the gap left in the budget to compensate for the banking bailout and divert funds to public services, in particular health and education.

What are the disadvantages?

• It is predicted that the currency markets could shrink by up to 14% as a result of the taxation.

• Although the tax is minute, $400 billion will obviously be missed by an already fragile global economy.

• The dispersal of the funds will be difficult in relation to who gets what. Major disagreements can arise as some may want a bigger piece of the pie and others may not be willing to share as much.

• In order to be implemented, the scheme would need the support of the G8 or G20 nations, who may be resistant to the idea.

For more details and to lend your support, visit: robinhoodtax.org.uk