The global Occupy movement has called for rallies throughout the world today in support of a "Robin Hood Tax", a tax on financial transactions such as trading in shares, bonds and futures.
There is a long history of proposals for a Financial Transaction Tax. After the 1929 Wall Street crash and in the midst of the Great Depression that followed, John Maynard Keynes proposed such a tax. A related tax on currency speculation was proposed in the 1980s by Nobel laureate James Tobin.
Several forms of tax on financial transactions already exist, such as stamp duties on share purchases. Still, although some countries have dabbled with national level Financial Transaction Taxes, the Occupy movement is now joining calls for a Global Financial Transaction Tax.
Appeals for a Financial Transaction Tax have multiplied since the 2008 financial crisis. This was brought to widespread public attention by the UK campaign for a "Robin Hood Tax" that was launched in February 2010. A remarkable number of high profile public figures now support such a tax.
US politicians Nancy Pelosi and Peter DeFazio have proposed to "Let Wall Street pay for the restoration of Main Street". An IMF report on Financial Sector Taxation prepared for the G20 in September 2010 supported the establishment of a Financial Activity Tax. French President Nicolas Sarkozy and German Chancellor Angela Merkel actively support an international Financial Transaction Tax. This Monday the Pope also called for such a tax.
There are two main arguments for a Financial Transaction Tax. First, it would introduce stability into the financial sector by slowing the flow of speculative capital and thereby reducing the frequency and consequences of financial crises. Second, it would raise tax revenue in a way that does not tax workers or consumers, but instead taxes the financial sector that has grown so much with the financialisation of the economy over the past 30 years.
There is much to consider in introducing a global tax such as this, including what causes the tax would be used to fund. Debates also continue about the rate at which such a tax might be set. When Daniel Defoe proposed such a tax in 1701, he suggested a rate of 10%. Today, discussions are generally at the level of "basis points", that is, how many hundredths of a percent the tax would be set at. A Financial Transaction Tax at 5 basis points, for example, would tax financial transactions at a rate of 0.05%.
The Occupy movement is joining others in seeking to make clear to political leaders the need to call the financial sector to account, and identifying the practical means through which this can be done. Marches around the world this weekend are timed to put pressure on governments in advance of the G20 meeting in Cannes next week. Although New Zealand is not a member of the G20, any resolution of the G20 would have significant impact here, not least as a result of Australia's membership.
We often hear talk in business of the need to "think outside the box". It would seem that when it comes to thinking about tax, we have either not been doing so, or have been making sure that the box is extremely small. When the Victoria University Tax Working Group made its report to the government in 2010, for instance, a Financial Transaction Tax was not even mentioned.
The Mana party proposed a similar "Hone Heke Tax" earlier this year, and repeated this in its economic justice policy statement this week. The fact remains, however, that the main parties have avoided entering into serious discussion about a Financial Transaction Tax. This reveals how out of touch National and Labour are with international thinking about how to respond to the social consequences of the power of the financial sector, and about what might be done to prevent future financial crises.
The Robin Hood Tax proposal goes well beyond the proposals for a capital gains tax that have recently been raised in New Zealand. It also extends beyond New Zealand, and therefore goes much further than what Mana are currently proposing. The Occupy movement is global, just as the reach of finance is global. Likewise, a concrete proposal is now on the table for a Global Financial Transaction Tax, with the G20 identified as one institutional mechanism for its introduction.
As the Occupy movement grows in New Zealand and internationally, many are starting to see that this is not a movement of incoherent and unrealistic dreamers. This movement is connecting with progressive thinking globally and now showing what practical steps we can take together to change the world.
* Campbell Jones is Senior Lecturer in Sociology at the University of Auckland.