Trade Transaction Tax - The Death Of All Us!

Tell us what country it is. I'm packing my bags!

signed Fed-up of UK.

It seems that this tax is not a new idea born out of the latest financial crisis.

A Nobel laureate (James Tobin) has already suggested a taxation of all foreign exchange transactions, although at a rate of 0.1% in the 1970's.

The so called 'Tobin tax' was at the time proposed to slow down the pace and size of speculative foreign exchange trading.

In those days, the feasibility was not given since origins of transactions could be shifted for tax purposes by participants. A further consideration (at the time) was that the tax while on one side generating vast amounts of additional income for the government (or the body that levied the tax), it would hurt short term speculation - like trading daily to weekly - by as much as 10-50% per investment (long-term speculation was deemed unaffected).

It was concluded though, that forthcoming enforcements to offshore regulations could provide a way to create the technical groundwork in order to make such taxation feasible.

Critics of the 'normative economists' who have re-proposed the tax since the 70's, say that there are is no practicability in introducing such measures for the simple reason that if it (the tax) was introduced, its margin would have to be so small as to not effect the feasibility of taking a single (or bulk) of trades for short term profitability. Given that, the revenue it would produce would easily be outweighed by the negative effects to the generating side (traders) who could in turn drop from the equation.

A further point was the assumption that the tax would have to be implemented across borders for the reason that one country alone would have great difficulties to impose such a tax on grounds mentioned earlier (off-shore trading is one example).

If a 'multilateral' agreement was reached between many countries, it could only be done through a body like the United Nations for example, who would then have the control over the raised money - and its disposal to whatever projects deemed essential. This will most likely not include the bailout of failing financial institutions in countries like the US or the UK, but rather projects that are concerned with the welfare of third world countries.

The latest suggestion to adopt a version of the 'Tobin tax' came from french premier Nicholas Sarkozy, suggesting that the G20 should implement it.

My personal view on the issue is reflected best in Ayn Rand's novel 'Atlas Shrugged', which was first published in 1957 and describes the struggle of creativity and human greatness against oppressing governments who stifle competition for the purpose of their own survival.

regards
daytrading

0.25% tax per transaction would totally kill forex trading, and therefore also liquity. And no one benefits of low liquity. Markets need to be traded to work efficiently, am I right? Not to kill the liquity the tax should be very low, like 0.001%.

Also, I don't get the point that Tobin tax would stabilise the markets. I think it's pretty much opposite, since liquity gets thinner, then big boys can move markets more easily despite the tax.

Luckily US and many other countries as well are not supporting this tax, so it's not going to come true, at least in the near future.

And if it sometimes realizes, it probably takes years of negotiating and preparing before it's ready for implementing, so it's not going to happen in a year or two... Correct if I'm wrong.

What is scary is that George Soros is for this type of tax.

This is a mess. If this takes off and governments still cant pay the bills...

I guess a revolution of some sort is on the way.

And we all know govs will never balance their books.


In case you were wondering - yes, there will be blood.

Also want to add that US will do whatever the gov tells. People here in the states are all spoon fed.

Apart from the ones that are military, the rest of the public is too fat to go and protest like they do in europe.

And even if US public was to go against the gov with guns, the gov would just take away everyones guns like they did during Katrina.

Americans are weak as a nation. Most of them would not last a day without others. Fat blobs.

Oh, not to mention that many of US public are misinformed.

tada...

No i dont listen to republican radio, and no i didnt vote for obama. Who was there to vote for in the first place. The choices were poor.

They want to tax everything.

Instead of focusing on improving our civilization we are just toying around. We need to move on people. Just like the first days of human flight, human space exploration - we need to evolve, invent, forgive and forget.

now... tada.

Interesting observations, guys. Thanks.

http://www.elitetrader.com/vb/showth...pagenumber=727

that thread will answer all of your questions. The problem with the tax is it won't just pass in the US all who support it have said that world wide agreement is needed. Second it's not the issue of the tax it's self it's the increased spreads and the fact that there are talks to exempt large banks as they are market makers. This tax will kill volume and as defazio has said kill speculators well in the futures market if a "socially useless" speculator takes the opposite side of a wheat contract from a farmer, the speculator takes on the risk and the farmer can plant his crop thus increasing food supply. Compare this to everything else that's traded and add in yhe increased spread and volitility. They also state that individuals who buy mutual funds will be exempt, but the fund itself will have to pay when buying stock thus the investor will have either a lower return or higher fee. Finially this isn't really a tax but more of a participation fee as you pay to buy and pay to sell, it's important that a major financial center like the US does not go with this policy as this would not work on a global level.

Can anyone familiar with this process post what is the fastest time frame this can become a reality? 2012? maybe 2015? sooner then that?

IMF comes out with there findings in June preliminary is said to be February. If its positive Brown Sarkozy Palosi have all been in favor, there are many who oppose it including 36 congressman who collaborated and wrote a letter to the others.

Looks like they might just modify this one so that it passes because they might not want any losses. or the least amount of loss as possible.

Another possibility is that they are pushing with demands knowing they cant get them. So they push to the max to later accept option that they wanted in the first place.

Just some thoughts.

well there is speculation that some of the push from Europe could be political, again Pelosi her self said that in order to work it needs global support.

http://www.infowars.com/now-eu-wants...more-bailouts/

There is your global support.

Is less liquidity better? Im not an expert at that but I think NO.

I'm sure our brokers are aware of the problem at hand. There are many brokers -retail- and they all have many profitable traders who bring in large amount of comissions. Im willing to bet that there are some powerful financial organizations that are working on countermeasure to this proposal as we speak.

p.s. That site might be a little biased.

When is obama leaving again?

So wait.............

They are working on exemptions for big financials due to the simple fact that they provide liquidity? and.... at the same time they are ...........

I feel angry, do you?

Im not a profitable trader. But Im determined to become one.

Well that site a more then a little biased. I agree though, it makes no sense to say that this is a tax on the banks that caused the collapse all while exempting the big banks, luckily there are a few people high up that understand that in no universe that makes sense and more need to be informed, join that thread that I posted and write your representative.
Thought I would add this, the IRS let citi off owed tax, money that could have been put to good use was let go. (http://www.chron.com/disp/story.mpl/...s/6773525.html)

What ever the number they come up with, say its 400 billion.

Thats the number considering current liquidity.

With this tax imposed liquidity will drop - thus the amount will not be even close to the original number that was estimated.

So what they estimate at 400bn will be reduced to 50bn, as an example.

Will that kind of measure be really needed?

The governments really need to start balancing their check books and stop hiring private contractors to do work for the millitary.

If a company sells say, a winch

http://www.baesystems.com/static/bae...90_arv_Web.jpg

.... to another company - they sell it at list or a very comfortable price.

But if you have someone like coast guard buying that same winch from you all of the sudden the price doubles tripples, because government has money....

Well, this just isn't fair.

US needs to start to look at the price tags.

Don't tax me bro...

thats the other thing it ends up costing them money as traders leave the market and they exempt this bank and that bank. They are estimating a 14% drop in volume but the huge impact comes from widened spreads and as people/businesses try to grow capital they will face wider spreads this tax and volatile markets.

very try to look beyond this tax?

Wats next, where do you draw the line. Tax will prevent future crisis, baleout will prevent 10% unemployment.

Government speculates just like we do.

No seriously. If there is another step after this tax, what could it be? Internet traffic tax?

First you let gov control health care. Then they make it so you have to pay 1000$ for not wearing a seat belt. Wats the argument for 1000$ seatbelt ticket you might ask. Well they might say, since we have to pay for your insurance you HAVE TO WEAR IT WITH BIGGER PENALTIES. Cause if you get injured, gues whos gonna pay the bill.

A tax on your breathing... If I understand correctly, carbon credits will be tradable on an exchange, so you can and build up a pretty good sized account and breath all you want, maybe even have enough for your loved ones and friends too.

Yesterday I did some googling regarding this tax, and found some great articles of it (Finnish though). It seems that this tax is so complicated and problematic to implement that I'm pretty sure it'll not be realistic in the next ten years, at least in global scale. And it has been on the agenda for about 30 years now, and it has been discussed on actively many times earlier also, with no results.

The greatest problem in it is that it would require the support of every single country of the world to work properly. If just one country leaves out of the tax, the money markets soon find their way into that country and the tax becomes useless. Countries like Hongkong and Switzerland etc. are never going to accept this kind of tax, and it seems US neither.

Funny thing to notice is that it's actually against the Europian Union's constitutional law to have any control or restriction on any capital movements. So before they would be able to implement this just in Europe, they should change the constitutional law, which requires the majority suppport of every 27 member country, and even this would be a challenge.

Another thing against this tax is that there's no evidence of the potential influence. No one really knows what effect it would eventually produce, and if the tax works at all. There's so much things on the potential "minus side" that it would be crazy to start creating such a huge global system, if there's no guarantee it works.

One more funny thing the supportes of the tax declare is that "the currency markets being worth 2 trillion a day, the tax would produce 0.25% of that amount a day." LOL. Aren't they just making the currency markets about 90% smaller, so a bit too optimistic tax expectations.

Now I have the piece in my mind again. LOL. The odds for this tax becoming global in the next ten years seem to be very, very low.


Happy trading and Merry Christmas! http://www.forexfactory.com/images/s...rn/biggrin.gif

Finn

The US and others have for a long time not liked retail trading. The tax will eventually come in some shape or form.

In 5 or 10 years time the financial sector will be very different to the one it is now. All traders will require some form or qualification/license to operate in the markets.

If a government can find a way to generate more tax revenue then it will regardless of the consequences. They only want big players in the market as this makes it much easier for them to track and regulate. There are many retail traders who dodge taxes by constantly changing their residential status etc.

I for one will be out of forex (commercially) in the next couple of years having stock piled enough in salary/bonuses etc.

Scoobs.

Hi,

On what grounds do you think that all traders, specifically private persons will require a qualification/license to engage in the fin. markets?

If the government only want the 'big players' in the market, who were the players that contributed to the recent financial problems (as far as I know, there were hardly any retail traders involved in CDO's and other sub-prime speculation)?

I am not sure about the US, but here in the UK it is not quite possible to 'dodge' taxes by changing your residential status - in fact, changing your residential status for any purpose is extremely difficult (especially after 9/11 and subsequent similar events around the globe).

regards
daytrading