WON’T BANKS JUST PASS THE COSTS ON TO US?

No, because Financial Transactions Taxes (FTTs) are specifically aimed at high-frequency trading, and the customer-base of hedge funds and investment banks is comprised primarily of high net worth individuals, not ordinary people. Hedge funds, investment banking divisions of large banks, and dedicated investment banks dominate this market, and so taxes on an FTT would fall primarily on these companies and corporations.

As FTTs are targeted at high-frequency banking operations, they can easily be designed in a way that protects the investments of ordinary people and businesses. Like other taxes, specific exemptions and punitive measures can be built in to protect e.g. lending to businesses or exchanging holiday money.

The IMF has studied who will end up paying transaction taxes, and has concluded that they would in all likelihood be ‘highly progressive’. This means they would fall on the richest institutions and individuals in society, in a similar way to capital gains tax. This is in complete contrast to VAT, which falls disproportionately on the poorest people.