The Robin Hood Tax: Perpetuating the Problem by Taxing the Thief

Interesting video with Bill Nighy talking about the ‘Robin Hood Tax‘ that would see 50p raked off all financial transactions that didn’t include members of the public. This would raise around £200bn globally each year which could be put into projects helping the poor:

Obviously raising money to help the poor is a wonderful idea, and the principle of tax levies to redistribute wealth is one of the core principles of a decent economy, but I think there are some major problems with it.

Firstly, it would require a globally-consistent tax regime, which would be extremely difficult to put in place. It would only take one rogue selfish state like Monaco to not sign up for every financial institution to suddenly move core operations there.

More fundamentally though, it still doesn’t get to the root of the problem, and may actually perpetuate the problems of global poverty. The 50p that banks would give for each transaction does raise a lot of money – but nothing in comparison to the profits that they continue to create out of highly complex derivative deals. These deals ultimately do not add stability to the economy, nor do they serve to trickle wealth down. They exploit information gaps so that those with inside knowledge have the power to make a lot of money through speculation.

Additionally, a tax on these sorts of trades may serve to validate them, and actually increase the amount of money being thrown at them. Similarly, it could reduce the amount of money bankers give to charity because they can claim to be ‘doing their bit’ already.

The intention is good: redistribution of wealth from the rich to the poor. I’m not sure this is the best way to do it because it fails to act at a systemic level. One might as well tax the thief who is stealing from you, and feel glad that you got some money back.

So, while the effort is to be applauded, I’m a little worried that the tag-line ‘be part of the world’s greatest bank job’ may actually be more true than Robin Hood might think…



7 responses to “The Robin Hood Tax: Perpetuating the Problem by Taxing the Thief”

  1. Acetate monkey

    I see your point Kester, the possibility of bunking out of it by mopving, the legitimation of bad practice and hiding the need for systemic reform are all potential downsides, but isn’t it the case that it’s something? It’s not brilliant but it’s better than nowt. As with all social problems there needs to be a multiple-pronged solution. this is just one part of a bigger toolkit required to ‘fix’ the global economy?

  2. ‘It’s something’ has been the excuse for so long for not changing the systemic problems that I’m tiring of it. And given the apparent depth of this crisis it seems a good time to actually do some seriously deep work on regulation, rather than introducing what could actually be seen to be an incentive to gamble more.

    It’s like ‘Celebrity Who Wants to be a Millionaire’ – where rich celebs have to answer questions correctly to gain more money for their chosen charity. It’s like WTF – JUST GIVE THE POOR THE MONEY. Don’t let it be contingent on bunch of idiots answering banal questions!

  3. Nice one, Kester!

  4. Hi Kester,

    there is one form of international transaction that can massively destabilize economies that the Tobin Tax/Robin Hood Tax would help to prevent – that of buying massive amounts of a currency in order to drive its value up for a matter of hours then reselling at a small percentage profit, but when done often enough, it’s a big win for the trader… Even the 0.05% tax would make those deals less profitable, and their often disastrous impact on fragile economies would be stopped. That was one of the main motivations behind the original Tobin tax, rather than the new spin of ‘raising revenue to tackle poverty and climate change’.

    The Robin Hood re-branding is a fantastic bit of opportunism, in the best sense of the word, but the original tax had a preventative intention as well as a redistributive one. Eat into those tiny margins that really quick trades of massive amounts of foreign currency generate, and you stop some of the destabilization that they cause…

    Clearly it’s not a panacea – the system is rotten to the core, but while we tear down the edifice of unregulated global finance, this would help slow the impact for some more fragile economies…

  5. I’d agree with that Steve. One of the main reasons I bank with the Co-operative is that they refuse to make money by speculating on sterling because of its destabilising effects (must look into whether they are doing so on other currencies too).

    If you want to read more on the Tobin Tax, and why it may be a good idea, there’s a good article here in Prospect.

    My problem with both Tobin and Robin (which is, as you say, just his better-looking media-friendly brother) is that I don’t think we are seeing much tearing down of the edifice – which means that they function to validate banking theft and risk, not slow the impact while restructuring occurs.

  6. Acetate Monkey

    I certainly didn’t mean that “something” should be taken as “enough”, more that as well as fix the torn artery we need to apply temporary pressure to prevent death. Of course the risk is that once something temporary has been done then everyone could think that it’s been fixed. That’s the way we work with the environment, personal health, damp in the back bedroom. However whatever edifice change needs to occur will be more successful through evolution than revolution. (Or is that just a crippled mind leaning on the handrail of a cliche?) As for all the celebrity charity entertainment shows, WTF indeed! (Though would anybody give as much spontaneously if RedNose day didn’t put on a circus?)

  7. The Tobin tax has been suggested for a long time and it’s been mothballed, in effect, because it was awaiting a multilateral deal, as you suggest. What’s actually new about this particular take on it is the realisation that it may not need to be multilateral after all. The precedent being cited is the stamp duty the UK gov levies on various financial transactions. The level of this proposal is such that, in the light of the observed effects (ie nil) of the stamp duty, it would be reasonable to think that it could be done unilaterally. Of course the real issue would be to make sure it actually was hypothecated…