The big idea

What is it?

We are calling for governments around the world to implement a tax on financial transactions – called the Robin Hood Tax.

It would tax the trade in financial assets such as stocks, bonds and foreign exchange, traded both physically and as derivatives (options, forwards, futures and swaps). It would cover both those  bought and sold on Exchanges and those traded Over the Counter (OTC). While OTC trades are technically more difficult to capture, the long-term goal is for all financial transactions to be taxed.

Some of this needs international agreement, but some such as currency transactions can be taxed by individual countries. The UK already taxes share trades with a 0.5 per cent stamp duty. We say it should also tax sterling exchange at 0.005 per cent (5p for every £1,000 exchanged).

How much would it raise?

Up to $400 billion globally every year, with the rate of tax would vary from 0.5% on stocks to 0.005% on currency transactions.  A tiny tax raises so much because of the sheer volume of transactions.

 

Estimates of annual global trading volumes

US$ billions
Shares/equities traded on a market 60,000
Foreign exchange trading 900,000
Exchange traded derivatives including those relate to interest rates and gilts 2,200,000
Over the counter, derivative and swap trading 950,000
Total 4,110,000

(source Bank of International Settlements, International Finance Services London)

Various experts (Schulmeister (2009) who provides a good summary of the work of others, Baker et al (2009), and our own campaign research) have produced estimates of the tax receipts, using various methodologies.  All estimates are in the hundreds of billions of dollars.

How does it work?

Ten years ago it was felt that a financial transaction tax was too complex to collect.

But a lot has changed in the last decade, as banks have improved their IT infrastructures (such as the Real Time Gross Settlement – RTGS) to help drive down trading costs. The 0.5% Stamp Duty paid on shares on the London Stock Exchange is one of many taxes on financial transactions now in place.

So the Robin Hood Tax would be applied wherever a transaction takes place. Currently, the vast majority of financial transactions take place on regulated exchanges in financial centres like New York, London and Tokyo.

And though the details of how to tax Over The Counter transactions have yet to be finalised – as these currently occur between financial institutions, without the official exchange being involved –  the bank licence system could be changed to ensure that these trades do take place within financial exchanges.

Will the tax be passed on to consumers?

The Robin Hood Tax will not impact on personal banking or on retail banking. That’s because it targets a distinct area of bank operations – high-frequency large-volume trading, undertaken by financial institutions in the ‘casino economy’. 

If you change money to go on holiday, send remittances abroad, invest in a pension fund or take out a mortgage, you will not be affected by this tiny tax.

Can the financial sector afford to pay it?

Although 0.05% is a tiny tax, $400 billion is a substantial amount. We recognise that even such a small tax will have an effect on the market. Economists such as Schmidt have estimated that at a rate of 0.005% currency markets may shrink by 14%. This is due in part to the fact that the margins on some speculative trades are extremely low and these may not continue.

Banking is the most profitable industry in the world, with profits of $788 billion in 2006, which have rapidly returned since the financial crisis, and are predicted by some to double by 2016.   Banking is 26 times more profitable per employee than the average of all other industries. (Source: McKinsey, What’s in store for global banking?)

There’s more detail in our FAQ.


  • Martin
    The idea would be to eliminate short-termism, which is a destructive force in the economy and in our lives.
    Therefore, the idea of raising direct taxation on each individual "investment".
    If a gain is made by buying something and selling it within 80 days, then Tax would be 80% of the gain. After that point, 20%.
    A staightforward 80/20 rule.
  • David Chester
    Robin Hood was a thief! So is taxation when it is taken from people whose work and effort makes them wealthy. But when the living comes from what others have done, then this is robbery on a grand scale. This is what land owners and land speculators do. Please read the full article below:

    The basic cause of the economic crisis was not due to the banks but due to the way that our laws are preserved without correction for the times in which we live. This is a government responsibility and although the banks did add to the bad situation by easing credit for too many risky mortagages, it is not because of this that we now face austerity.

    Every 19 years with the present system of land tenure, the price of land goes through a cycle and it ends with a collapse and shock. This is due to land monopolists with bank assistance, thinking that the rising prices of land will never end. Real estate includes buildings too, but the cost of their construction does not vary to such an extent and it is important to place the situation in true perspective.

    The government should control the way that land is used and to do this in a natural way by introducing a tax on land values instead of our present tax regime on incomes, purchases and possessions (not including land here). The effect of this gradually introduced change to land would be to reduce land prices and allow the unused valuable parts of it to return to efficient use. By making the cahnge slowly, speculators (whose cries of “bankrupcy for banks” if land is taxed) are unsubstantial since they will have time to transfer their investment elsewhere and without the run on the banks becomming such a threat as would occur were the new tax regime suddenly introduced at full power. A simple calculation shows that over 5 years the loss in value of land is 1/10 of what is lost by unemployment being sustained.

    The reduced production costs will result in greater demand for goods and this means that unemployment will reduce along with poverty and homelessness. This is the opposite of what Britain is facing today.

    The value of land is created by the population who live around the site in question. The land owner does nothing to gain from this, but past taxation has caused the land to become useful due to the infra-structure. So morally this better way of tax and land regulation will help us out of the present crisis.

    TAX LAND NOT PEOPLE; TAX TAKINGS NOT MAKINGS!
  • andrewwhitman
    What a stupid tax. I don't know how much glue you lot are sniffing down there, but I think you need to switch brands.

    From what I can see, you're charging a small amount on financial transactions. So when I go to America and I need to change up my GBP into USD, I will lose some of it for this tax? I purchase an ISA to protect my money from tax... but it gets taxed by this waste of space tax?!

    Before writing up tax legislation, did you guys use to walk into care homes and shake disabled OAP's by the ankles and steal their WWII commemorative gold watches during nap time? RHT seems like the logical step up from that!

    Summary: Think up something better than taking our money. Have a cake sale, create something the world needs, sell your glue supply.

    Thanks
    Andrew
  • A Allison
    Did you read the article?

    "The Robin Hood Tax will NOT impact on personal banking or on retail banking...If you change money to go on holiday, send remittances abroad, invest in a pension fund or take out a mortgage, you will NOT be affected by this tiny tax."
  • Kaj
    I think this is completely wrong. By all means increase the tax on banks and wealthy individuals but taxing transactions will just massively reduce the business of the financial institutions so that less money is available to be taxed. 0.05% by value might not seem very much but it is more than the profit in a great many transactions, especially in foreign exchange.
    Tax the profit not the turnover.
  • Hard up bank worker
    Robin hood alledgedly stole from the rich and gave to the poor. Your idea would infact mean that the banks would then steal from the poor to pay back the rich! I work in a call centre for one of the banks that hasn't had to borrow money from the government. In the last 2 years I have seen a number of my colleagues made redundant by the bank in an effort to "streamline" and "cost cut" to ensure they remain as profitable as possible. Your Robin Hood tax would directly affect the people in this country who do not earn massive salary & bonus payouts as the banks would certainly look for ways to claw back the revenue lost in these taxes by other means (cost cutting, reduction in credit interest rates, increased debit interest rates, increased fees (now legal!). Its is bank customers and employees like myself that would feel the backlash from your idea not the rich directors and shareholders of the banks. I suggest going back to the drawing board and having a re-think.
  • Consider this...
    This is an old idea called the Tobin tax, first brought up and dismissed in the 70's and again in the 90's. The problem is, according to the IMF, that it is an indirect tax on everyone except the bankers and it is difficult to enforce. Dominique Strauss-Khan, said, "transactions are very difficult to measure and so it's very easy to avoid a transaction tax,".
    Do you think this is a new idea that will save the world? Sadly if you do, you are an idiot. Bankers can and will avoid paying.
  • Hello @consider.

    1) It's not the Tobin tax (http://robinhoodtax.org.uk/debate/isnt-this-the-tobin-tax/)

    2) The matter of 'who pays?' is an interesting and complex one and nothing like as clear as you imply. The opposite. See here for a former derivates trader's view: http://robinhoodtax.org.uk/debate/the-robin-hood-tax-who-pays-in-the-end-a-former-investment-banker-and-derivatives-trader-investigates/

    3) Coming on a message board and calling people idiots, is... childish. Please don't do that.
  • Miroslav
    How about some published peer-rewieved papers? Why were all there "working papers" rejected by anonymous referees in respected journals?

    None of the above meet minimum quality standards of verifiable evidence... so anyone could delete them from the Wikipedia under the WP:SELFPUBLISH policy:

    "Anyone can create a website or pay to have a book published, then claim to be an expert in a certain field. For that reason self-published media, whether books, newsletters, personal websites, open wikis, blogs, Internet forum postings, tweets, etc., are largely not acceptable." [ http://en.wikipedia.org/wiki/Wikipedia:SELFPUBLISH ]

    Having said that, NSI's report written by Schmidt in 2007 is actually worth reading, if only to find out how dangerous little knowledge can be. He assumed that:
    - everyone is a price-taker paying the transactions costs (as opposed to earning them as a market maker), which is true only for 50% of the stock market volume (according to SEC), while the rest would either disappear or become wider by twice the tax rate (1% spreads for stocks = 40% capital lost over investor's lifetime by a typical mutual fund),
    - his tax proposed in 2007 was a currency-only tax ("CTT"), which would work only in the 70-ties, when there were no untaxed perfect substituted alternatives such as currency futures and currency ETFs... he apparently did not know about their existence.
  • Cameron
    So if the finance industry profits are 788 billion, and this new tax is going to take away 400 billion of that, they plan on pretty much axing half of the finance industries profits??

    While we're at it, lets just start taking half of everyone else's profits. "Hey auto industry, how much did you make this year? Oh, really, well then, we're going to have to go ahead and take half of that from you, but please, don't fire anyone, keep paying your employees high wages and benefits, and don't raise your prices."

    Why is the financial industry such a target? People who don't make money in the financial markets always seem to have this idea that making money via trading is wrong or evil.

    This tax sounds self destructive. If it targets high frequency, high volume trading, which relies on slim margins, this tax sounds like its just going to discourage such speculative trading. If that's the case and far fewer transactions are performed as a result of the tax, aren't the estimated tax revenues way too optimistic?

    But then I suppose everyone wants something from nothing. As long as the taxes aren't coming directly out their incomes people are happy, right? Their salary checks aren't coming from the banking institutions so they don't think this tax will effect them at all. Something from nothing.
  • alex freeman
    It may be true that people, through work, generate wealth but the reward for doing so is not reflected in the standard of living of most of these people. If it was we would be living in some sort of enlightened socialist or communist society. We now live in an age of abstract economics where not only physical assets but ideas and concepts are vastly inflated beyond their 'real' value. There is little rational basis in how most things are valued because this 'natural' process has become subject to manipulation. Perhaps it always has! This manipulation has, in turn, created crude markets for 'socially useless' items and products. Perhaps this creates jobs but also creates waste and demonstrably strips resources from poor economies. It's a vicious circle that is getting smaller and smaller I think. It seems curious to me that the same human ingenuity that created this sort of economics and world is also a slave to it's own construction.
  • Mike
    I think this sounds like an excellent idea.

    I want to know if the figures really do stack up though...?

    You say that this will raise $400 billion, yet the banking industry only made $788 billion in 2006. So this "small" tax is equivalent to over half of the year's profits from the whole worldwide banking sector!!!... which just isn't realistic surely???

    Can someone address this issue, so we know if this is a campaign that can be trusted?

    Thanks
  • andy baxter
    I thought part of the point of a tax like this, as well as raising money, was to make certain kinds of profitable but socially useless speculation unprofitable, and thus prevent this kind of speculation from destabilising national economies. It would be good if you talked more about this side of it on the website.
  • Alan Wykes
    "Majority comes from debt generated by governments. And this debt is funded from taxes paid to the state by the people."

    Errr...have i missed something here?

    Or have you?

    bank bailouts
  • John77
    Have the Cayman Islands signed up?
    No? then the Hedge Fund billionaires will be exempt whereas Granny will be charged when she sells the shares Grandad received from his firm's Save-As-You-Earn Scheme to pay for his funeral. Changing banking licences would only affect banks and not Hedge Funds.
    You haven't thought how to deal with OTC. The whole of small investor individual dealing is done on regulated markets but the unregulated Chi-X now turns over more than London, Frankfurt or any other stock exchange in Europe(the FT says it is ranked second because the total of Amsterdam, Paris and Brussels are treated as one, qwheras each is smaller than London or Frankfurt). There are other unregulated "deep pools" as well.
    Again the big banks (Goldman Sachs, Citibank, Nomura, UBS, Morgan Stanley, Credit Suisse, Societe Generale and BNP Paribas are big players on and investors in Chi-X) so, again the rich can dodge this tax while the little guys get caught.
    Of course a tax on banks' FX deals will impact retail transactions since the banks have to balance their FX books several times a day and every retail purchaser or seller of FX unbalances the bank's FX book - so the transaction cost has to be passed on to the retail customer (unless the bank wants to go bust). If you want to stop people buying foreign goods (including oranges and bananas as well as Champagne and Mercedes) that is a debatable proposition, but please argue the case for it so that I can put up the counter-arguments instead of sneaking it through under the pretence of supporting charities.
    There are a surprising number of Christians in the City, so next time you have a "bright idea" you should ask one of them whether or not it will work
  • John
    Somebody who is behind this idea obviously thinks that the banks keep printing presses in their basements and this is where all the money comes from. I must assure you, all the money used by the banks for speculation comes from wealth generated by work performed by people. Deposits or investments make only small part of it. Majority comes from debt generated by governments. And this debt is funded from taxes paid to the state by the people. Your "Robin Hood" tax would hit the poorest first, because rich are much better in evading taxes. Remember than also half of it would be spent on duck's houses and other essential stuff.
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