ATTN: US Traders Currency Transaction Tax Bill Introduced in House

In what seems like an unrelenting effort by US government and regulators to drive all US Forex transactions offshore... at least until they make that illegal too, today Pete Stark has introduced H.R. 5783 the ludicricously named, Investing In Our Future Act that will impose a tax of .005% on each currency transaction. Of course in his mind, only a few evil currency speculators will be affected, but the wealth will be spread around to solve global warming, and help children everywhere. After all, who could be against helping children?

Mr. Stark:
“Every day, there are $4 trillion worth of currency transactions,” Stark, D-Fremont, said in a news release. “The vast majority of these are speculative – banks trying to make a buck by out-guessing the system. This speculation contributed to the last Wall Street crisis and makes our financial system less stable.”

“The proceeds of a new tax on currency speculation will be used to provide billions in new funding for important global and domestic priorities. At home, this bill will give more money to affordable child care programs. Globally, it will contribute billions to climate change and world health programs,” added Stark, chairman of the House Ways and Means Health Subcommittee.

Stark’s H.R. 5783, the Investing In Our Future Act, would impose a 0.005 percent fee on the buying and selling of world currencies and on currency derivative transactions by a U.S. person, including domestic corporations, partnerships, subsidiaries of foreign corporations, and individual citizens and residents.

Among groups supporting the bill are ActionAid, Friends of the Earth, RESULTS, Health GAP (Global Access Project), Sustainable Energy and Economy Network at the Institute for Policy Studies, and Africa Action.
All prosumably organizations with their hand out looking for some wealth to be spread their way in exchange for their democrat votes.

You can contact your representative in a quick and easy way... even if you don't know who he or she is ( shame on you) at this link run by the US House of Representatives. Just enter your zip code and click the button.

https://writerep.house.gov/writerep/welcome.shtml[/URL]

"This bill is in the first step in the legislative process. Introduced bills and resolutions first go to committees that deliberate, investigate, and revise them before they go to general debate. The majority of bills and resolutions never make it out of committee."

One pip round turn, that's a bit steep!

Guess it won't be long before the UK tries to cash in.....

I don't know exactly how the tax would be calculated, but it could be more than 2 pips per round turn, as each leg in a round turn trade involves 4 transactions. Each leg of a turn invloves two transactions, the sale of one currency, where you get taxed .005% on that, and the buying of another... where you get taxed another .005%.

If one currency is greater than 1 to 1 with the dollar, say Euro at 1.2800, a 10,000 euro position gets taxed .005% of 12, 800 dollars.

Go long Eur/USD:

Buy 10,000 Euro @ 1.2800 $12,800 * .005% = 64 cents
Sell 10,000 USD $10,000 * .005% = .50 cents

Close out your EUR/USD long position:

Sell 10,000 EUR at 1.2850 12,850 * .005% = .6425 cents
buy 10,000 USD 10,000 * .005% = .50 cents

Total tax on one mini lot round trip Eur/USD $2.28 or 2.25 pips.

But it gets even worse, because the liquidity providers have to pay the tax on their end as well. They will likely pass this on to the trader in the form of wider spreads...

Do you really want to trade Forex if you have to pay a 4 pip spread, and an extra 2 pips in Tax on your end?

Can you say Eur/USD at 10 pips a round turn?

Good point, I hadn't thought of that, wow that's obscene!

Definitely not!

Hi,

Another bill that will never see sun light. trust me. If they will tax currencies why they don't introduce VAT.

My 13 cents
13

VAT's been talked about too! Tax and spend. Spend more and tax.

Ours is going up from 17.5% to 20% pretty soon....well heck someone has to pay for the bail out, the overspend, government cuts etc etc etc...plus we have a Royal Family to support and they ain't cheap!

Gas here in UK is around £5.50 a gallon (~$8.50) so you ain't doing so bad!

Guess I better start looking at some equities charts, no doubt UK will try this forex trick on us too.....

The industry is best capable of raising opposition to this, so write your broker and make sure they know this is in the works. I have mine.

Who does he think he's kidding? That money isn't going to children
of any sort. It's going to whores like this dude...

http://graniteslate.typepad.com/.a/6...ddef970b-320wi

...who want their solid-gold shower curtains back.
(That's not a joke -- source)




International charities are living high on the hog at donors' expense.
They aren't out getting their hands dirty by digging wells in Madagascar;
they're firmly entrenched in luxury offices or waiting for their latest
white SUV to be delivered to their offices.

I had a feeling I'd have to switch brokers to someone in the UK--
this might just clinch it.

https://writerep.house.gov/writerep/welcome.shtml[/URL][/quote]

Interesting post. For me, paying 1 pip in addition to the spread is acceptable. I'm ready to pay 1 pip more even if i do not want that of course.
BUT 2 pips like you say is too much and that would mean the end of forex for me and for many others.
How the tax will be really calculated ? When i buy 1 lot of eur/usd, i should pay 1 times for the buying and 1 times for the selling, but not 4 times as you say! It's totally stupid.
They could also divide by 2 (0.0025+0.0025) so it is 0.005% when you are long and 0.005% when you are short or they could also apply the tax only for one transaction of each leg so it is really 0.005% per leg ( and not paying 2 times the tax per leg !).

Be prepared for your actual costs to be more like ten pips a round turn. And that would be for EUR/USD whose vast liquidity provides the narrowest spreads....

The liquidity providers, like all businesses will pass on their costs in higher spreads, remember, they have to pay the tax on their side too.... spreads are the only place they have to recoup the cost.