THE CLAIRE FOSS JOURNAL
THE ROBIN HOOD TAX by D’Arcy Craig Milligan
The real global economy – the value of all the goods and services of every nation in the world - is worth, at the most, around $70 trillion. That is a mere 3.5% of the global financial market economy that is now approaching $2,000 trillion ($2 quadrillion). This huge market, a major part of our ‘casino economy’, is self-regulated and almost completely untaxed.
Correcting this latter oversight could provide us with a tax that recognises the astronomical expansion of ‘financial services’ in recent years and the fact that taxation has not kept pace with it. Allowing for two transfers per trade, such a tax at the miniscule amount of .1% could yield as much as $4 trillion globally with an estimated 6% of this – $240 billion – representing Canada’s share. It is proposed that we divide this fairly between the three levels of Canadian government in accordance with the formula suggested below (see 10).
Such a tax alone could create the funding we need to eliminate both deficits and debt, while replacing all other taxes. It could improve health care and educational facilities, revitalise communities and give a massive boost to our national economy. It could return our nation to prosperity and – since the money has already been created and placed into circulation – attain these otherwise unachievable goals without the risk of inflation!
The simplest and speediest solution lies with a form of Financial Transaction Tax (FTT) that is beginning to attract global interest. It has been dubbed the Robin Hood Tax – since it takes from the rich to give to the poor – but the unique version outlined below attempts to do so in a non-vindictive way; one that benefits all. It would turn the current global financial crisis, caused by mismanagement, deceit, fraud and greed into an unprecedented opportunity to overcome poverty, repair the world’s economies and heal the breach that has opened up between the banks and the public at large. It would make the financial industry not just the source of the problem, but part of the solution.
1. A ‘no exclusions’ Financial Transaction Tax of one tenth of one percent (.1%) would be imposed upon all transactions or transfers by commercial and investment banks/brokerage houses or other financial institutions involving any financial instrument, including cash, cheque, credit card, electronic transfer or ‘in-house’ book entry. It would be collected directly and automatically at source - and triggered automatically the moment any entity either acquires or relinquishes control over funds, goods, property or services etc.
2. FTT would apply to all banking and investment transactions, both incoming and outgoing, and in this sense is pyramidal - in the same manner as most other taxes, or the hidden cost of compounding interest. For this reason the proposed flat rate has been kept down to a level that would barely impact upon ‘high street’ banks, small businesses or individuals.
3. It would require only minor modifications to banks’ existing computer programs and – given FTT’s many personal and corporate tax benefits – these would be undertaken at ‘no charge’ to the public purse.
4. The FTT revenue collected would be remitted daily to a special FTT account held by the publicly-owned Bank of Canada.
5. All other forms of taxation would be incrementally phased out, beginning with personal income, corporate and sales taxes. Annual tax returns would become a thing of the past.
6. This version of an FTT would primarily target the nearly $2 quadrillion in ‘trades’ now being processed annually through the globe-straddling DTCC (Depository Trust and Clearing Corporation1) , of which well over 80% is calculated to be purely speculative; i.e. a ‘casino’ gamble. Canada’s share, cleared via DTCC’s associates the Canadian Depository for Securities Ltd. (CDSL), is believed to amount to an estimated 6% of the global total, or US$120 trillion. CDSL shares are, however, closely held by the banks and Canadian performance figures have been hidden from the public until now, requiring independent researchers to extrapolate them from other sources. That may be about to change.
7. A far smaller, secondary source would be the trillions of dollars commercial banks process annually in their regular domestic and international financial transactions; represented largely by commercial remittances, mortgages, consumer and business loans, credit/debit card and personal spending. Total FTT on a mortgage or salary of $100,000 would amount to only $200 (see 3), deducted at source by the bank, with no other taxes payable. Some of the reasons for including this secondary source of revenue are to simplify tax legislation and eliminate possible loopholes, to ensure the incremental replacement of all other forms of taxation, to enshrine the principle of ‘no exclusions’ and to greatly simplify the required modifications to the banks’ current computer programs.
8. The entire process would be under the direction and responsibility of the federal Minister of Finance, guided by and ultimately responsible to our elected parliament. The primary mandate of the Canada Revenue Agency (CRA) would shift to supervising and monitoring on a regular basis all financial institutions from the Bank of Canada and Canadian Depository for Securities Ltd. down, while incrementally removing the CRA’s restrictive focus away from individuals, small businesses and legitimate national commerce. The creative energy this latter change alone would release within our society would be immense.
9. The Treasury Department would be responsible for checking and auditing the FTT account and reporting monthly on its progress to our elected parliament. To ensure transparency, once signed off the results would be seen as being ‘in the public domain’ and made immediately available to all via the Treasury Department’s official website.
10. Distribution of FTT funds would be equally as simple as the collection process. It is proposed that the federal Treasury retain 50% of all FTT revenue income ($120 billion) and remit on a regular monthly basis the 50% balance of Canada’s receipts, divided proportionately between provincial Finance Departments. On the basis of $240 billion gross annual FTT funds, this would amount to $120 billion over 12 months for the provinces. $24 billion of this – 10% of federal FTT gross revenue – would be immediately re-allocated by provincial ministries to incorporated municipalities. For a city of 30,000 residents, this would translate into more than $20 million a year. In the case of both provinces and municipalities, the allocation percentages would be determined by population size as reported in the last available census returns from StatsCan.
Since community concerns have little direct voice in Ottawa, a proviso would be added; that the 10% municipal share of the Federal Treasury’s FTT annual gross receipts is to be legally protected ‘in perpetuity’ as a minimum – and priority – payment. Local governments would directly enhance the established provincial funding of local Schools and Hospitals. To ensure immediate availability of relief at times of emergencies and natural disasters, municipalities would also organize and fund an efficient Local Emergency Program.
11. Of the 50% retained by the Federal Government, up to 10% could be allocated to global concerns - including direct but highly accountable tithing to poor nations - under the direction of the Finance Minister but subject to prior approval by our elected parliament.
This proposal would require international cooperation to ensure that speculators and tax evaders didn’t simply shift their activities to more ‘cooperative’ jurisdictions. Existing international regulators like the G-7, G-10 and G-20, together with powerful institutions like the BIS (Bank for International Settlements), IMF and WTO, could easily address this potential problem. They have done so in the past by simply threatening to deny currency convertibility to a ‘host’ nation, or by enforcing harsh economic sanctions against any ‘pirate’ jurisdiction refusing to comply.
Creating the political will to achieve this goal will require public education and community-oriented initiatives to ensure a broad-based, pan-partisan involvement that can jump-start provincial and federal politicians from a local riding level. This is not a movement that is going to be initiated from the top down by current party leaders (with the possible exception of Paul Hellyer’s Canada Action Party) or by senior members of government, controlled as they are by financial institutions via highly paid lobbyists and non-accountable senior bureaucrats.
THE TOBIN TAX
The above proposal should not be confused with the Tobin Tax. It targeted only speculative foreign exchange dealings and proved to be unworkably complex in terms of both collection and distribution. It offered no relief for the cash-strapped communities where we live, work and raise our children; nor for provinces struggling in vain to maintain essential healthcare and education services. Instead, Tobin’s proposal suggested that proceeds should be under the control of the UN, funding debatable, boundless and ‘easily fudged’ activities such as global warming prevention, while perpetuating the forlorn hope of trickle-down benefits from a powerful plutocracy via increasingly wealthy oligarchs.
The Robin Hood Tax is not the final solution, but it would stop the tragic haemorrhaging of our nation’s wealth - and fund badly needed public services and capital assets - while the ability to create our money is incrementally removed from private banks, with their fatally flawed system of interest-laden debt and returned to our elected government where it constitutionally belongs. Backed by Canada's vast assets, immense natural resources and the industry and creativity of its people, such a change would save billions of dollars in annual interest charges and greatly boost our economy.
It simply isn't sound practice for the three levels of government to borrow at interest from dangerously leveraged and failing private banks – many now dependent on public bail-outs – when the Federal government has the publicly-owned Bank of Canada in place through which could be issued paper/electronic currency and bank credit far more valuable as purchasing power than that issued by private bankers.
In the meantime, the question we need to put on the political agenda is not “should we have a Robin Hood Tax?” It is the rather more pressing question of how else can we possibly pay for the costs of the global economic mess into which we have been led by powerful ‘self-regulating’ money lenders.
1 http://www.dtcc.com/downloads/annuals/2008/2008_report.pdf (DTCC’s 2008 Annual Report p.4)