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Great article on the proposed 'Robin Hood Tax', written by Julian Morrow



I NEVER thought I'd say this, but I'd like to talk about tax. Before you flee to the Cayman Islands, hold on a second. If you're an ordinary citizen who pays their taxes, or even just a barrister, this tax won't apply to you.

We need to talk about tax because of the GFC. In case you're unfamiliar with the acronym, it refers to the massive global economic meltdown caused by large financial institutions, known in economics as Greedy F'ing Cs.

Trying to save financial institutions from themselves, and the quaintly named ''real economy'' from the impact of the GFC, has cost governments a packet. The US and European central banks had to buy $US2.5 trillion of government debt and toxic assets in the greatest injection of liquidity the world has seen since David Boon's 1989 Ashes flight to London.

Although Australia's financial institutions fared better, the need for economic stimulus made it necessary for the government to install school buildings suitable for mounting plaques commemorating Julia Gillard. As a result, government debt is now somewhere between $200 billion and whatever figure Barnaby Joyce came up with today (probably closer to the former).

In short, governments across the world need to raise whopping amounts of revenue, not just to return to surplus and pay off national debt, but also to address urgent public spending priorities such as global poverty, climate change and study trips.

It is in this context that a global movement in support of a ''financial transaction tax'' (FTT) or ''Robin Hood tax'' has emerged. The FTT would be a very small levy - just 0.05 per cent - on transactions in financial markets.

It would not apply to individual consumer transactions, but to transactions between financial institutions - things such as collateralised debt obligations and credit default swaps, whatever they are. (The people trading them don't know either).

The rate of the FTT is so low - half a cent in every thousand dollars - it can't reasonably be argued that it would deter substantive trading activity, not that financial institutions limit themselves to reasonable arguments.

No self-respecting government would slug its real human taxpayers at such a pitiful rate. But that's all that our delicate-petal financial institutions would have to cop. Nevertheless, the sheer volume of trading activity means the FTT could be quite the money spinner. It's hard to estimate, but according to one massive abacus, the FTT would raise $1.5 billion a year in Australia, and up to $350 billion a year in the US.

Just as significant is the fact that a financial transaction tax would reduce instability in the financial system because it discourages speculative activity.

The financial system is awash with short-term investments. Complex transactions can be started and finished - and the profits banked - in the time it takes Kevin Rudd to utter one unintelligible phrase. Indeed, the speed of trading is so great that in some hedge funds, the male traders think about transactions more frequently than they think about sex.

While the FTT would have a negligible effect on long-term investments, it would hit high-volume, short-term trading more, since it would clip the ticket of every single trade, even if it only lasted a few seconds. A disincentive to speculative, short-term trading such as this would bolster the overall stability of the system. Britain's chief financial regulator, Adair Turner, described such trading as ''socially useless'' (a pretty good description of many economists, actually).

If you don't believe me - and I admit I'm probably one of the few people with less economic credibility than Barnaby Joyce - then listen to British Prime Minister Gordon Brown, French President Nicolas Sarkozy, German Chancellor Angela Merkel, or any one of the 350 economists from more than 35 countries - including Jeffrey Sachs and the Nobel laureates Joseph Stiglitz and Paul Krugman - who have signed a letter to the G20 calling for the introduction of an FTT. All of them support its introduction, as do other Australians far more reputable than me, such as World Vision boss Tim Costello and ethicist Peter Singer.

The Robin Hood tax will give governments more money to pay off debt and fight poverty, and stabilise the financial system without deterring meaningful trade. Australia should take the lead in urging all G20 nations to adopt it.

Julian Morrow is a comedian and television producer, best known as part of the satirical team The Chaser. For more on the FTT, visit www.robinhoodtax.org.au