THE BLOG
30/09/2015 13:37 BST | Updated 30/09/2016 06:12 BST

Robin Hood Tax - Feared by the Bad, Loved by the Good?

Broadcasters seem to relish the opportunity to play the Robin Hood theme song whenever the Robin Hood Tax is in the news, as it has been over the past few days... So as City lobbyists are hastily dusting off their crib sheets on why we should oppose an FTT, it's worth tackling their main charges head on

Broadcasters seem to relish the opportunity to play the Robin Hood theme song whenever the Robin Hood Tax is in the news, as it has been over the past few days.

No sooner had Labour's shadow chancellor John McDonnell announced his intention to review how his party could implement the tax of between 0.01%-0.1% on trades in bonds, derivatives and shares than '...feared by the bad, loved by the good...' was being blasted over the airwaves.

But behind the catchy campaign title is a far more prosaic reality: over 30 such taxes (also known as financial transaction taxes) are already in existence around the world - collectively raising around £30billion a year.

Right here in the UK we have a very successful stamp duty on shares, in this case a 0.5% tax that applies every time a UK company share is bought or sold, which raises the Exchequer £3billion a year.

So as City lobbyists are hastily dusting off their crib sheets on why we should oppose an FTT, it's worth tackling their main charges head on:

'Let us not overburden the financial sector with taxes that will hamper its ability to drive growth'

We could not be further from doing so: financial sector corporation tax receipts have dwindled in recent years - down from over £7billion before the crisis to just £2.3billion last year - thanks in part to a slashing of rates.

Whilst the bank levy was designed to ensure banks still paid, George Osborne is replacing it with a corporation tax surcharge which will mean Britain's big banks pay even less tax in the long run.

Ironically, it was the banks themselves that had the most profound impact on Britain's ability to grow - precipitating the largest crisis of a generation and the longest fall in living standards since the 18th Century. An FTT would raise billions in revenue that as well as helping us live up to our international commitments could be ploughed back into other areas of the economy through a British Investment Bank or job creation programs helping to rebalance the economy away from an over reliance on the City.

'We are unfairly targeting the banks, this is the politics of envy'

If there is anything banks have been unfairly targeted with, it's handouts: the trillion pound bail out; billions borrowed cheaply through the Government's Funding for Lending scheme yet not lent to businesses; money skimmed from quantitative easing, financial services exemption from VAT - the equivalent of economic steroids administered over many years.

The International Monetary Fund and the Institute for Fiscal Studies have both said the financial sector is under-taxed. A bloated sector poses a systemic risk and crowds out more productive areas of the economy - something a Robin Hood Tax could help address.

'Implement this tax and traders will flee to New York, Hong Kong or Singapore'

They can try, but they'd still have to pay the tax. That's how the UK's stamp duty works: say a trader moves to New York then sells a UK share to a buyer in Singapore. The levy must still be paid to the UK Exchequer. In fact, if it isn't, then legal ownership for that share won't transfer to the new owner. There's an incentive for compliance meaning avoidance rates are low.

It's the reason neither the Labour party nor anyone else need wait for the US to get behind the FTT - unilateral implementation can and has been done.

This tax is also popular. Three times as many Labour supporters backed the FTT as opposed it, even before the change in Labour's leadership (YouGov poll). One thousand economists have backed the proposal, a million-strong petition has recently been collected in support.

Crucially, eleven European governments - of both the political left and the right - have committed to implementing an FTT on both shares and derivatives. They are due to announce details of the tax in the coming weeks, so we may just be hearing that theme tune again.