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Forex Taxes

  • #321
  • Edited 11:01am Feb 20, 2009 10:11am | Edited 11:01am
Added Taxes........ Death by a thousand cuts.
it's ONLY .25%...... add that to all the rest of the little taxes we already pay and those that are coming......
(insert sarcasm here) It's only .25%.......... what a dipshit statement ......

So WTF have you been smoking?

Speaking of little taxes.... get ready for this one..... THE AIR TAX

OOO OOO and don't forget this one.... THE MILAGE TAX
Same Whore .... Different Dress
  • #322
  • Feb 20, 2009 10:42am Feb 20, 2009 10:42am
Quoting SmokyByers
First off, I don't think it will affect spot Forex at all. If I'm not mistaken, it's for stocks, options, and futures only. Second, c'mon, it's only .25%, a quarter of a percent.

Nobody likes new taxes, but I hear traders all over the boards freaking out like it's the end of trading as we know it. People need to improvise, overcome, and adapt (to quote Clint Eastwood) and stop tripping over pennies on their way to dollars (to quote Wade Cook).

Smoke

Pennies? Just so people understand how bad this actually is and how it will actually destroy the markets it is applied to, a forex example. If this were to be applied to forex, and let's say Rabid is correct that it is 0.25% on each side of the transaction - trading a 1 lot ($100,000) would equate to a $500 tax for making a buy/sell transaction. That is 50 pips of extra spread that this tax would impose!!! How many traders actually average anywhere near 50 pips per trade of profit (just so they can break even)?!

Now imagine what this would do to the stock market, futures market and options markets. Imposing a 50 pip/tick extra built in spread would totally sap liquidity in these markets because all short term and medium term trading (and most long-term trading) would no longer be viable. It is the worst form of socialism I can imagine. Destroying the capitalistic markets in one fell swoop. The pension funds, hedge funds will all cash out because they will run the numbers and come to the same conclusion. There won't be much in the way of revenues from the tax because investors will go elsewhere where the game isn't rigged against them. Nothing good can come out of it.
  • #323
  • Feb 20, 2009 10:48am Feb 20, 2009 10:48am
FXEZ....
Thank you for explaining the results of this proposed tax so eloquently.
I have lost my tolerance for stupidity many years ago and I am not nearly as gentile with my remarks and opinions anymore.
Same Whore .... Different Dress
  • #324
  • Feb 20, 2009 11:01am Feb 20, 2009 11:01am
Yep.... "Battle Hardened" is just something that happens after a while.
If Nice Guys finish last...... There ain't a space for none of 'em in this friggin' business.

.... "Impeach Obama Now!"..... Oh my,... they spent what? ... 7 years working on Clinton ??? They're probably drawing up there own battle plans already!
  • #325
  • Feb 20, 2009 11:07am Feb 20, 2009 11:07am
Quoting Rabid
It would not be a good thing to impose, but this guy sounds like just another clueless loudmouth.
Unfortunately clueless loudmouths seem to be getting their way a lot lately. Somebody's got to do something to stop this. This is bad, bad news. Any tax or regulation on other trading instruments will eventually find its way to forex.

I'm getting a little rabid myself. These jokers who think that imposing this tax will do anything besides hurt the economy are kidding themselves.
  • #326
  • Feb 20, 2009 11:33am Feb 20, 2009 11:33am
Quote
.... "Impeach Obama Now!"..... Oh my,... they spent what? ... 7 years working on Clinton ??? They're probably drawing up there own battle plans already!
LOL. Problem is: this isn't Obama. Going after the wrong people just makes this more confusing.

It's this guy:
1. http://en.wikipedia.org/wiki/Peter_DeFazio
2. http://www.defazio.house.gov

According to his bio on wikipedia he actually voted AGAINST the new stimulus bill. One of only 9 to not vote yes, 1 of only 7 to to vote no. He's a lifetime politician, has been in there since 1987, which means he's a stereotypical 80s Democrat who's had to "move right" in order to survive. He takes a fiscally conservative stance on a lot of spending and debt related issues, but apparently not on taxes.

Quote
If this were to be applied to forex, and let's say Rabid is correct that it is 0.25% on each side of the transaction - trading a 1 lot ($100,000) would equate to a $500 tax for making a buy/sell transaction.
I hope that I'm not right, but the "tax on position size, not on profit" thing came from the website listed above. It's the example they gave, so I assumed it was correct.

You can get the fulltext here:
http://www.thomas.gov/cgi-bin/query/z?c111:H.R.1068:

"(a) Imposition of Tax- There is hereby imposed a tax on each covered securities transaction an amount equal to the applicable percentage of the value of the security involved in such transaction."

Percentage of the value of the security, so it does make it sound like it's based on the position size. It does, however, appear worded as to be as confusing as possible.

And...

"`(d) Covered Securities Transaction- The term `covered securities transaction' means--
`(1) any transaction to which subsection (b), (c), or (d) of section 31 of the Securities Exchange Act of 1934 applies, and
`(2) any transaction subject to the exclusive jurisdiction of the Commodity Futures Trading Commission."

Section 31 of SEA covers both on exchange and off-exchange securties. The CFTC has clear jurisdiction over futures and options, and some jurisdiction over spot forex.

Don't believe me? Go here:
http://www.cftc.gov/opa/enf98/opaforexa15.htm

"A new federal law, the Commodity Futures Modernization Act of 2000, makes clear that the CFTC has the jurisdiction and authority to investigate and take legal action to close down a wide assortment of unregulated firms offering or selling foreign currency futures and options contracts to the general public. In addition, the CFTC has jurisdiction to investigate and prosecute foreign currency fraud occurring in its registered firms and their affiliates."

Now that may be up for debate, but the CFTC sure believes it has jurisdiction to combat Forex scams, which means it's not a far stretch to consider it included here as well.

So yes, Virginia, this would tax trading to death... literally. And along with it, billions of dollars of tax money would be flushed down the toilet as the industry implodes.

The sad thing is, this would be blindingly obvious to anyone that's ever traded before. Goes to prove that a career politician shouldn't be making policy for an industry he doesn't understand.
  • #327
  • Feb 20, 2009 12:08pm Feb 20, 2009 12:08pm
Quoting SmokyByers
Second, c'mon, it's only .25%, a quarter of a percent.
Once a tax gets put in place, it becomes an "acceptable tax" and can be raised to 0.5%, 0.75% with little or no difficulty. Look at sales taxes, postal rates, etc. as examples. So yes it is a big deal.
  • #328
  • Feb 20, 2009 2:15pm Feb 20, 2009 2:15pm
If they ever impose this tax, they should impose it ONLY on Wall Street firms. I really don't understand why should should we pay for their crimes.
  • #329
  • Feb 20, 2009 2:47pm Feb 20, 2009 2:47pm
Does anyone in the US know of a tax being implemented and then later being totally abolished? I can't think of any and I'm 50 years old. If they sink their claws in, they never let go.
  • #330
  • Feb 20, 2009 3:06pm Feb 20, 2009 3:06pm
Quote
If they ever impose this tax, they should impose it ONLY on Wall Street firms. I really don't understand why should should we pay for their crimes.

But what constitutes wall street, anyway? I invest in ETFs, index funds and mutual funds. All of which are wall street products. They have to buy and sell in order to balance their portfolio. That means those of us that invest this way have to pay the new taxes just to break even. How is that going to effect only Wall Street when you're talking about millions of people with their retirements on the line?

Quote
Does anyone in the US know of a tax being implemented and then later being totally abolished? I can't think of any and I'm 50 years old. If they sink their claws in, they never let go.

Of course not, which is why this has to die before then. Fortunately it's only in committee, but it's still enough to be a problem.

Frankly I'll be looking very closely at that house seat in the next election to see if there's any opposition I can fund. This guy is a career politician, he shouldn't be regulating industries he doesn't understand. The apparent fact that he doesn't know his limits and has decided to threaten my choice of industry means he needs to go.
  • #331
  • Feb 20, 2009 3:39pm Feb 20, 2009 3:39pm
Quoting FXEZ
Pennies? Just so people understand how bad this actually is and how it will actually destroy the markets it is applied to, a forex example. If this were to be applied to forex, and let's say Rabid is correct that it is 0.25% on each side of the transaction - trading a 1 lot ($100,000) would equate to a $500 tax for making a buy/sell transaction. That is 50 pips of extra spread that this tax would impose!!! How many traders actually average anywhere near 50 pips per trade of profit (just so they can break even)?!
Whoa, check your math on this bud. 50 pips? Don't think so.

Look, I'm not for the tax, I just get tired of belly-aching.

JohnDoe, have a bad day trading? I'm a dipshit??? You fit the profile of the person who really doesn't do anything except sit on forums and criticize others posts. This type of aggressiveness really points out the fact that you really don't have much going on. In going through your past posts, they really consist of one of three categories:

a) posting jokes in the 'Comedy' section

b) complaining about Obama (I don't like Obama myself, but don't waste the energy complaining)

c) exclaiming what a rough ride you've had in trading

You fit the profile of a really discontent and unhappy person, I would suggest getting some help.

Moderators, why does he get to call me a dipshit???

Smoke
  • #332
  • Feb 20, 2009 3:59pm Feb 20, 2009 3:59pm
Why do "traders" have to pay though? It wasn't the traders fault that banks sank.
  • #333
  • Feb 20, 2009 4:14pm Feb 20, 2009 4:14pm
Quote
Whoa, check your math on this bud. 50 pips? Don't think so.

Actually he's correct. This is based on position size, not profit. So...

Standard lot is $100,000. Pip value is $10 per pip.

$100,000 buy, $100,000 sell. That's .25% per trip or .50% total.

$100,000 * .005 = $500.

That's a $500 tax on the trade. Now at $10 per pip, $500/$10 = 50 pips. That's an effective 50 pip tax on every standard lot trade. His math checks out.

Basing a tax on position size is dumb, previous taxes are built on profit instead. He wants to treat it like a nation-wide sales tax, basically taxing the buying and selling of securities, not realizing what it would actually do.
  • #334
  • Feb 20, 2009 4:24pm Feb 20, 2009 4:24pm
Quoting Rabid
Actually he's correct. This is based on position size, not profit. So...

Standard lot is $100,000. Pip value is $10 per pip.

$100,000 buy, $100,000 sell. That's .25% per trip or .50% total.

$100,000 * .005 = $500.

That's a $500 tax on the trade. Now at $10 per pip, $500/$10 = 50 pips. That's an effective 50 pip tax on every standard lot trade. His math checks out.

Basing a tax on position size is dumb, previous taxes are built on profit instead. He wants to treat it like a nation-wide sales tax, basically taxing the buying and selling...
I really think the tax would be on the trader's actual cost basis, not necessarily on the position size itself. I think it is speculation at best to assume that the position size would be taxed in a levered transaction. If it was, I would think it would be leveraged the same, more like-what 50 cents / pip. Again, I'm speculating, if someone shows me the resolution that proves me wrong, I'll eat my words.

Again, not supporting the tax, just trying to provide a logical voice amongst the panic. BTW, Rabid, I appreciate the healthly debate as opposed to the childish name calling of others.
  • #335
  • Feb 20, 2009 4:36pm Feb 20, 2009 4:36pm
Quote
I really think the tax would be on the trader's actual cost basis, not necessarily on the position size itself. I think it is speculation at best to assume that the position size would be taxed in a levered transaction. If it was, I would think it would be leveraged the same, more like-what 50 cents / pip. Again, I'm speculating, if someone shows me the resolution that proves me wrong, I'll eat my words.

On the first page I quoted from the full text of the bill.

You can find it here:
http://www.thomas.gov/cgi-bin/query/z?c111:H.R.1068:

Down towards the bottom, section 3, Subchapter C, subsection (a), reads:
"(a) Imposition of Tax- There is hereby imposed a tax on each covered securities transaction an amount equal to the applicable percentage of the value of the security involved in such transaction."

An amount equal to the applicable percentage (.25%) of the value of the security involved in such transaction. No where does it say cost basis. It specifically says of the value of the security.

So what if we base this on current MtM value instead of lot size? Euro currently at 1.2835.

.005 * 1.2835 = .0064

That's 64 pips. That's even worse than basing it on lot size.

Quote
Again, not supporting the tax, just trying to provide a logical voice amongst the panic.

I completely understand. I've done the same myself when I didn't feel the situation warranted the emotion. I wouldn't label my feelings "panic" exactly... more of a guarded "no way." The bill is still only in committee, and has gotten quite a negative response. It's unlikely that it'll ever get anywhere. But there's no reason to take a chance on it.

Bills like this have a tendency to crop up from time to time, so when it rears it's ugly head once... we might see it again later down the line in some form. My concern would be if it got attached as a rider to a bigger omnibus bill.
  • #336
  • Feb 20, 2009 4:44pm Feb 20, 2009 4:44pm
Quoting Rabid
On the first page I quoted from the full text of the bill.

You can find it here:
http://www.thomas.gov/cgi-bin/query/z?c111:H.R.1068:

Down towards the bottom, section 3, Subchapter C, subsection (a), reads:
"(a) Imposition of Tax- There is hereby imposed a tax on each covered securities transaction an amount equal to the applicable percentage of the value of the security involved in such transaction."
I read that too and I think that statement is geared towards equities and they would have to come up with some other taxation model IF applied to spot Forex, big IF.

It's all good, I'm with you that it most likely won't make it out of committee and even if it did, wouldn't trickle down to spot, at least not right away.

I wasn't aiming the 'panic' comment at you, but all of the trading boards are lighting up with trader's truly believing that this would be the end of their livelyhood.

Have a good weekend,

Smoke
  • #337
  • Edited 4:59pm Feb 20, 2009 4:46pm | Edited 4:59pm
Nobody asked for my opinion, so here it is anyway:

ANY (read: ANY, whatsoever) additional tax, fee, cost, surcharge or whatever it shall be called
imposed on financial transactions will not be welcomed by the trading community.

If the amount is as small as $0.01 USD, traders will and rightfully should have a shit fit.

The NFA fee of $0.01 per futures contact traded adds up to several hundred dollars per month
for some of these guys trading 100 lots multiple times a day. If it went to 2 cents
or a nickel or a dime, they would absolutely go bat shit. I would too.

A new tax, even of the smallest magnitude would have a huge impact on high frequency traders,
thereby affecting liquidity and the market as a collective whole. If you trade lots of volume then
you understand where I'm coming from. Otherwise, you're likely in the "what's-the-big-deal?" group.
Some trade 100 times for 1 tick, others trade 1 time for 100 ticks. To each his own.

So, I don't like it and I don't want it.

On the flipside: Washington wants a funding solution that will seem reasonable to
the greatest number of observers, both home and abroad.
It sounds so easy to say, "... it's only 25 cents, what's the big deal ?" and the mass population,
who really don't understand financial markets anyway would assume it's okay because
it's sounds innocent enough, so such a proposal would gain popular support.
The same people really don't understand all the fees and taxes applied to
their local phone bill each month so they just shake their head and pay it.

"...Afterall, we have to pay for all of this somehow, right ? Let's tax the traders !"
They should all go f*ck their mother. That's my money. Don't take my money.
It used to be in my neighborhood, if you wanted to take something from someone,
you had to kick their ass first. So now what, we just bend over and give it away ?

What's really messed up about all this is that no matter how much taxes are raised (or lowered),
how much interest rates go up (or down), or what the budget ends up for the fiscal year,
whether a deficit or a surplus, IT'S ALL AN ILLUSION. We are debating the outcome of a rigged game.

This is like watching a movie for the 2nd or 3rd time and talking about how it might end.
We already know the ending, so we're all a bit foolish if we expect the ending to change
just because we're watching it on a DVD instead of a VCR or a Reel-to-Reel.

Read my lips: KNOW NEW TAXES.
Kiss my ass: I've already seen this movie....
  • #338
  • Feb 20, 2009 4:53pm Feb 20, 2009 4:53pm
Quote
I read that too and I think that statement is geared towards equities and they would have to come up with some other taxation model IF applied to spot Forex, big IF.
Nod, yea, but they do include futures w/ the CFTC statement later on. The model would kill equities too, altho that wouldn't directly impact us if so worded, it would still not be good. The CFTC clause applies it to spot, or at least it definitely could be used to by the IRS.

The way it's written now it's up for interpretation, it could go another way, but in it's current form... it could end up being very bad.

Quote
I wasn't aiming the 'panic' comment at you, but all of the trading boards are lighting up with trader's truly believing that this would be the end of their livelyhood.
Nod. As written, if it was passed as is, it definitely could. It is unlikely to get passed in that state, but it's worth keeping an eye on. It needs to die, and do so quickly. And the idiot that proposed it needs to be replaced so the message is crystal clear... "Don't F with us again!"
  • #339
  • Feb 20, 2009 5:13pm Feb 20, 2009 5:13pm
Quoting Rabid
It is unlikely to get passed in that state, but it's worth keeping an eye on.
It needs to die, and do so quickly. And the idiot that proposed it needs to
be replaced so the message is crystal clear... "Don't F with us again!"
This is absolutely essential to the process of a representative government.

Vote your conscious, but guard your wallet.
  • #340
  • Feb 28, 2009 9:21am Feb 28, 2009 9:21am
Hi i have big losses for this year what should i do and what can i expect with my taxes for this year 2009 and how can this help me for the next taxes time 2010????


Im new so i dont know what to do please if anybody can help me out and good advice i do really appreciated it....

Thank you
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