Tobin Tax stalled by the Coalition: what now?

To David Gauke
Exchequer Secretary to the Treasury
HM Treasury
1 Horse Guards Parade
London SW1A 2HQ

11.11.11

Dear David Gauke

Thank you for your letter of 21 October about tax avoidance.

I am pleased to learn that the Government is concerned about tax avoidance and evasion, and is strongly committed to increasing tax transparency. I welcome the call from the recent G20 for progress on non-cooperative jurisdictions and tax havens.

However, I am very concerned that the UK has opposed the installation of a Financial Transactions Tax within the EU on the grounds that the traders would (a) pass it on to the general economy, and would (b) move their operations to more lax jurisdictions.

It can be argued that this is an exaggeration of the actual risks.
But the Treasury's position makes a stronger argument for these measures to be brought in on a global basis.

In a globalised economy, it makes sense to have a globalised tax system.

The tax take from the FTT could then be used as Tobin intended it, as a fund for helping impoverished countries.

We are all painfully aware that there is a global financial crisis in operation. It makes absolutely no sense to impose austerity measures on country after country, measures that exacerbate low growth and/or recession, while vast amounts of national wealth are being siphoned out of national economies into tax havens.

In the UK, a full tax take on the richest 1% could neutralise the deficit, and the same would apply in countries like Greece, Italy and Spain.

You will be aware that several billionaires, starting with Warren Buffet, have put on record that some of their income streams are taxed at a lower rate than the average worker.

Global tax measures would be complex and difficult to bring in, but if the political will were present, it could be arranged to be ratified at the next G20. And the desperate global economic condition should supply that political will. It is a pity that the UK did not agree to the EU bringing in a FTT, since it would have motivated the UK to lead the world in bringing these tax measures in on a global basis.

I would be grateful if you would give this proposal serious examination, and hope that you will agree that it makes excellent economic sense.

Sincerely

Dr Richard Lawson
cc John Penrose MP