«A tax on speculation to fight poverty»- Corriere.it

An international tax on financial transactions, the solution proposed by X economists to fight poverty and climate change Robin Hood Tax, Tobin Tax or TTF: whatever you call it, the idea of ​​a tax on financial transactions to rebalance the negative effects of globalization increasingly discussed with each new economic crisis. And for good reason. The simple principle: given the sizeable entity of transactions on the financial markets, a tax with an extremely low rate would make it possible to collect significant tax revenues without affecting the functioning of the markets.

The FTT has all the attributes to be a good tax: low distortion, with strong redistributive effects, potentially high revenue and low collection costs. Another reason for the popularity of the FTT is the explosion in the volumes of shares, or other securities, traded on the financial markets (trading) which has occurred following the financial liberalization of the last decades. Since the 1970s, the amount of global stock transactions has increased more than 300 times. In France, the annual amount on the Paris Stock Exchange was 3.5 billion euros in 1970, 9 billion in 1980, more than 100 billion in 1990, more than 1,000 billion in 2000, to reach over 2,000 billion today. probably for all these reasons that today it is applied, in different forms, in more than thirty countries: in France, Italy, Spain, Switzerland, Hong Kong or Taiwan in particular, and continuously for more than three centuries in the United Kingdom – the stamp duty is even the oldest tax in force among our neighbors across the Channel. Clearly, the existing financial transaction taxes have not prevented the development of the financial centers that apply them, which are among the most important in the world.

Discussions of the FTT always focus on its impact: some hope to reduce market instability by discouraging speculation, while most opponents simply reject the principle of the FTT, fearing an increase in market volatility due to lack of liquidity. Empirical studies show that the first and second hypotheses are false. In its current form, the FTT has minimal impact on the markets. Not the great upheaval feared by some, but not even the definitive solution to the problems of the current financial architecture hoped for by others. It is not a question of punishing the bankers or the markets, since a tax with a broad base and a low rate does not create distortions, but produces high revenues, with low collection costs and with a strong redistributive character.

The FTT is therefore currently a significant source of revenue for many countries. Each year, it generates around £4 billion in the UK, more than €7 billion in South Korea, Hong Kong and Taiwan, and CHF1.5 billion in Switzerland. In France, its revenue is currently around 2 billion euros a year. How much could an FTT pay off at eurozone, European or even global level?

The equivalent of the French FTT or the UK stamp duty extended to the G20 level despite numerous exemptions, between $156 and $260 billion a year, depending on the nominal rate chosen of 0.3% or 0, 5%. About two thirds would be financed by the G7, a quarter by emerging countries. There would be enough, for example, to finance the fight against extreme poverty and climate change and to support low-income countries in the face of the upheavals for which our economies are primarily responsible. It would also be possible to extend the FTT to high-frequency trading, i.e. intraday transactions: the revenue raised could then exceed 400 billion dollars a year, and this could only promote the transparency of financial markets and increase public support.

In June, France and India organize an international summit in Paris for a “New Global Financial Deal”, intended to reform the international financial architecture. A move towards an international financial transaction tax would be a historic first. A group of leading countries could agree on the parameters of this tax, to be implemented by each country at the national level, and commit the proceeds to the fight against extreme poverty and climate change. These resources could be transferred directly to multilateral funds or through countries that would undertake to redistribute the equivalent amount to predefined institutions.

Faced with the explosion of needs to address global inequalities and climate change, the economic recovery of the countries most affected by the pandemic, the reconstruction of war-ravaged countries, the reform of global food systems and all the other great challenges we face , can we still afford not to introduce this fair and effective tax on the largest possible scale?