Guest Post, Gerald Doyle and Tanya Lalor: Our new book is entitled Social Enterprise in Ireland: A People’s Economy? and it is an edited volume that draws together contributions from leading academics as well as practitioners in the social enterprise, finance, and community development sectors in Ireland and Europe.
It aims to examine the concept of social enterprise, and what part it can play in the renewal of our economy and in addressing key issues facing Irish society. The key themes and issues discussed in this book not only will contribute to the debate on social enterprise, but will act as a resource to communities, policy-makers and those with an interest in the sector.
Ireland has a strong history of social economy organisations and collective action, notably such organisations as the GAA, the agricultural co-operative movement, and the credit union movement, the last being the world’s largest (per capita) financial co-operative. Although social enterprise arguably is under-developed in Ireland, relative to other countries – in terms of practice, policy and, indeed, ideology – this book illustrates the benefits of social enterprise to local communities and wider interests, such as the State.
The concept of social enterprise has gained attention in recent years and increasingly is seen as one viable response to the economic trauma Ireland has experienced. Social Enterprise in Ireland makes a strong case that social enterprise increasingly needs to be part of the way we do business.
Contents include:
1 Social enterprise in context in Ireland Michael Punch
2 Social enterprise or social entrepreneurship: economic solidarity or market hegemony? Deiric Ó Broin
3 Social enterprise and the green economy Gerard Doyle
4 Support for social enterprises Tom Daly, Gerard Doyle and Tanya Lalor
5 Social enterprise in action – A Traveller organisation’s experience Anne Costello, Margaret O’Riada and Martin Ward
6 Housing – an engine for social enterprise Chris White
7 Procurement and social enterprise Tanya Lalor
8 Finance and social enterprise Kieron Brennan
9 The private sector and social enterprise in Waterford Senan Cooke and Helen Kavanagh
10 Social enterprise in Sweden and Scotland: local and national responses Tor Justad
11 The European Union as a champion for social enterprise Erdmuthe Klaer
12 Co-operatives – what relevance now? Bridget O’Carroll, Olive McCarthy and Mary O’Shaughnessy
Social Enterprise in Ireland: A People’s Economy? is published by Oak Tree Press and is available from www.oaktreepress.com and good bookshops nationwide.
Social Enterprise in Ireland: A People’s Economy?
Editors: Gerard Doyle & Tanya Lalor
ISBN 9781781190708 : Paperback : €24.95
ISBN 9781781190715 : ePub ebook : €7.99
ISBN 9781781190722 : Kindle ebook : €7.99
160 pages: September 2012
Wednesday 31 October 2012
Wednesday 24 October 2012
Guest post: A discussion on the merits of Site Value Tax (SVT) as an alternative to a Property Tax is being held on Saturday, 27th October, 2012 at 4:00 pm in Castleknock Hotel and Country Club, Castleknock, Dublin 15. Hosted by: Dr. Camillus Power & Ms. Ethna Dorman.
Tel: 01 6406319; Mobile: 087 2235780; ethnadorman@gmail.com.
Guest Speakers: Emer O’Siochru – editor of “The Fair Tax”; Ronan Lyons, Economist, Trinity College Dublin and Balliol College Oxford; Judy Osborne, Spatial Planning Consultant; Chair: Dr. Camillus K. Power
Tel: 01 6406319; Mobile: 087 2235780; ethnadorman@gmail.com.
Guest Speakers: Emer O’Siochru – editor of “The Fair Tax”; Ronan Lyons, Economist, Trinity College Dublin and Balliol College Oxford; Judy Osborne, Spatial Planning Consultant; Chair: Dr. Camillus K. Power
Thursday 18 October 2012
Equality Authority Books Available
The Equality Authority’s Research, Policy and Good Practice Publications are available free-of-charge for collection from their offices.
VENUE : Equality Authority, 2 Clonmel Street, Dublin 2
15th October 2012 – 19th October (Monday - Friday 9.15 am – 5.15 pm)
This may be extended to next week also.
Are you a researcher, an academic, a teacher, a student or a NGO working on equality? Would you like to get free publications on equality?
Organisations, libraries, universities, schools, businesses, etc., are welcome to browse and take away equality publications free of charge. It will be possible to take multiple copies of a number of publications.
For further information: sminervino@equality.ie or ring Stefania at (01) 4173374
VENUE : Equality Authority, 2 Clonmel Street, Dublin 2
15th October 2012 – 19th October (Monday - Friday 9.15 am – 5.15 pm)
This may be extended to next week also.
Are you a researcher, an academic, a teacher, a student or a NGO working on equality? Would you like to get free publications on equality?
Organisations, libraries, universities, schools, businesses, etc., are welcome to browse and take away equality publications free of charge. It will be possible to take multiple copies of a number of publications.
For further information: sminervino@equality.ie or ring Stefania at (01) 4173374
Wednesday 17 October 2012
Jobs and credit crises call for clear policy response
Michael O'Sullivan (author of Ireland and the Global Question) has written a lucid article on what's required for job creation in today's Irish Times.
While Ben Bernanke, head of the Federal Reserve, voiced “grave concern” over high unemployment for “the enormous suffering and waste of human talent it entails”, Michael O'Sullivan argues that we are failing to address the fundamental barriers to job growth here.
While Ben Bernanke, head of the Federal Reserve, voiced “grave concern” over high unemployment for “the enormous suffering and waste of human talent it entails”, Michael O'Sullivan argues that we are failing to address the fundamental barriers to job growth here.
Tuesday 16 October 2012
Exploring alternative pathways
Tom Healy: With my colleague Rory O'Farrell we have reviewed the evidence about the impact of 'Plan A' and 'Plan B' over the coming 6 years. The paper was recently given at the Dublin Economic Workshop and is available online here.
Monday 8 October 2012
Revolt of the Rich
Nat O'Connor: A concern with the "predatory super-rich" as the new secessionists in the USA is very clearly articulated in this article ('Revolt of the Rich') in the The American Conservative.
It begins: It was 1993, during congressional debate over the North American Free Trade Agreement. I was having lunch with a staffer for one of the rare Republican congressmen who opposed the policy of so-called free trade. To this day, I remember something my colleague said: “The rich elites of this country have far more in common with their counterparts in London, Paris, and Tokyo than with their fellow American citizens.”
It begins: It was 1993, during congressional debate over the North American Free Trade Agreement. I was having lunch with a staffer for one of the rare Republican congressmen who opposed the policy of so-called free trade. To this day, I remember something my colleague said: “The rich elites of this country have far more in common with their counterparts in London, Paris, and Tokyo than with their fellow American citizens.”
Tuesday 2 October 2012
Choices Around Cutting Child Benefit
Nat O'Connor: Despite the helpful reminder from Joseph Stiglitz that "Austerity has almost never worked", the Government has decided to cut further and deeper in the next Budget, with reports that Minister Noonan will again prefer two-thirds spending cuts combined with one third tax increases.
There are no easy choices left for the Government, as it seeks to close the deficit through €3.5 billion of measures. While it is necessary to close the deficit, there are a couple of significant questions to be asked that provide important context for any consideration of cutting Child Benefit.
First of all, what is the Government's end goal in terms of public versus private provision of vital matters like health and education, childcare and housing, pensions and income?
Secondly, if 'everything' (including Child Benefit) is on the table for discussion, what are the values and principles that will guide the decisions about what to cut and who to tax?
As this chart shows, the net result of budgets to date has been to 'flat line' Ireland's overall level of taxation while reducing public spending. Any talk of a 'balance' between tax measures and spending in the actual effect of recent budgets is simply not true.
The figures are based on the Government's plan (in Economic and Fiscal Outlook, Budget 2012, page D.19) to end up with total revenue of 34.6 per cent of GDP and total public expenditure of 37.5 percent of GDP by 2015. While these figures might be slightly different in Budget 2013's documentation, there is little evidence of a changed strategy by Minister Noonan.
What level of public services can be delivered through spending at around 37.5 per cent of GDP?
The answer is, not anything like as much as what was delivered at the height of the boom and not the same kind of 'welfare state' as most Western European countries. The long-term EU27 average level of spending is roughly ten percentage points higher than Ireland. As such, if the Government chooses such a low target level of public spending, it should come as no surprise that some core elements of the 'social contract' between Ireland's State and its citizens are now being questioned.
One of those core elements is Universal Child Benefit. There are three clear features of this payment, which indicate fundamental values and principles: (1) It goes to all children equally; (2) It is paid to all citizens with children regardless of their income, as part of the 'return on investment' of taxation and social insurance; and (3) It is a payment from everyone to Ireland's children, regardless of whether or not they have children of their own.
Universal Child Benefit should not be considered a 'sacred cow' any more than the 12.5 per cent corporate tax rate or the existence of the Senate. However, these are major building blocks of the Irish social contract and they should not be radically changed without serious discussion of the implications.
Instead of an open discussion on the issue, there is a risk that the guiding principles underpinning Universal Child Benefit are being discarded without adequate discussion of the changed nature of Ireland's welfare state and social contract that is implied by those changes.
For example, there are endless reports that wealthy people don't need Child Benefit and should not get it. Somehow it is taken as the 'obvious' and 'easy' solution to means test Child Benefit or tax it. However, this argument sweeps aside all three guiding principles. Universal Child Benefit is a social contract, not an individual contract between a person and the State. It is only from an individualistic perspective that it makes sense to say Person A is too rich, therefore tax or cut his/her Child Benefit.
In reality, the administrative burden involved in means testing, plus the highly contentious issue of deciding who needs it and who can't have it, is expensive and fraught with difficulties. A much simpler solution is to say that, if some wealthy people don't need Child Benefit, than simply increase general taxes on wealthy people. At the end of the day, we all benefit from Ireland's children who are the future tax payers, health workers and others that we will need when we are old (whether or not we have children ourselves).
However, if we decide that Universal Child Benefit in its current form is too expensive (because of the decision by Government to target public spending at 37.5 per cent of GDP) than it is possible to imagine alternative uses of public money that would uphold the values and principles of the welfare state.
For example, if we decided that the provision of municipal crèches and pre-school education was a pressing social need (which it is) then we could provide places free-of-charge, to all children equally, regardless of their parents' means and paid for by everyone; because we will all benefit from all children in Ireland having a better start in life and better educational development.
For example, the OECD advises on the benefits of spending early on children.
This chart from another OECD presentation shows that Ireland (in 2008) had the highest net childcare costs in the OECD. No wonder so many families rely on Child Benefit payments!
What is so rarely mentioned in Ireland is that when taxes are low, people end up paying privately out their own pockets. It can be cheaper to pay more tax or social insurance to purchase certain kinds of goods and services collectively. And of course, when we pay collectively, we all share the cost of our children from whose future contributions we will all benefit. When we pay privately, the burden of paying individually is placed squarely on the shoulders of young families, who are not the best placed to carry that burden.
If we see Universal Child Benefit being systematically dismantled in the next Budget (as is suggested in recent reports), while we retain tax breaks, such as those for private pensions that massively benefit people with the highest incomes, then the fundamental values underpinning Ireland's budgetary policy need to be questioned.
The next three or four Budgets are not just about closing the deficit, they are about the nature of the future relationship and social contract between citizens and the State in Ireland for decades to come.
There are no easy choices left for the Government, as it seeks to close the deficit through €3.5 billion of measures. While it is necessary to close the deficit, there are a couple of significant questions to be asked that provide important context for any consideration of cutting Child Benefit.
First of all, what is the Government's end goal in terms of public versus private provision of vital matters like health and education, childcare and housing, pensions and income?
Secondly, if 'everything' (including Child Benefit) is on the table for discussion, what are the values and principles that will guide the decisions about what to cut and who to tax?
As this chart shows, the net result of budgets to date has been to 'flat line' Ireland's overall level of taxation while reducing public spending. Any talk of a 'balance' between tax measures and spending in the actual effect of recent budgets is simply not true.
The figures are based on the Government's plan (in Economic and Fiscal Outlook, Budget 2012, page D.19) to end up with total revenue of 34.6 per cent of GDP and total public expenditure of 37.5 percent of GDP by 2015. While these figures might be slightly different in Budget 2013's documentation, there is little evidence of a changed strategy by Minister Noonan.
What level of public services can be delivered through spending at around 37.5 per cent of GDP?
The answer is, not anything like as much as what was delivered at the height of the boom and not the same kind of 'welfare state' as most Western European countries. The long-term EU27 average level of spending is roughly ten percentage points higher than Ireland. As such, if the Government chooses such a low target level of public spending, it should come as no surprise that some core elements of the 'social contract' between Ireland's State and its citizens are now being questioned.
One of those core elements is Universal Child Benefit. There are three clear features of this payment, which indicate fundamental values and principles: (1) It goes to all children equally; (2) It is paid to all citizens with children regardless of their income, as part of the 'return on investment' of taxation and social insurance; and (3) It is a payment from everyone to Ireland's children, regardless of whether or not they have children of their own.
Universal Child Benefit should not be considered a 'sacred cow' any more than the 12.5 per cent corporate tax rate or the existence of the Senate. However, these are major building blocks of the Irish social contract and they should not be radically changed without serious discussion of the implications.
Instead of an open discussion on the issue, there is a risk that the guiding principles underpinning Universal Child Benefit are being discarded without adequate discussion of the changed nature of Ireland's welfare state and social contract that is implied by those changes.
For example, there are endless reports that wealthy people don't need Child Benefit and should not get it. Somehow it is taken as the 'obvious' and 'easy' solution to means test Child Benefit or tax it. However, this argument sweeps aside all three guiding principles. Universal Child Benefit is a social contract, not an individual contract between a person and the State. It is only from an individualistic perspective that it makes sense to say Person A is too rich, therefore tax or cut his/her Child Benefit.
In reality, the administrative burden involved in means testing, plus the highly contentious issue of deciding who needs it and who can't have it, is expensive and fraught with difficulties. A much simpler solution is to say that, if some wealthy people don't need Child Benefit, than simply increase general taxes on wealthy people. At the end of the day, we all benefit from Ireland's children who are the future tax payers, health workers and others that we will need when we are old (whether or not we have children ourselves).
However, if we decide that Universal Child Benefit in its current form is too expensive (because of the decision by Government to target public spending at 37.5 per cent of GDP) than it is possible to imagine alternative uses of public money that would uphold the values and principles of the welfare state.
For example, if we decided that the provision of municipal crèches and pre-school education was a pressing social need (which it is) then we could provide places free-of-charge, to all children equally, regardless of their parents' means and paid for by everyone; because we will all benefit from all children in Ireland having a better start in life and better educational development.
For example, the OECD advises on the benefits of spending early on children.
This chart from another OECD presentation shows that Ireland (in 2008) had the highest net childcare costs in the OECD. No wonder so many families rely on Child Benefit payments!
What is so rarely mentioned in Ireland is that when taxes are low, people end up paying privately out their own pockets. It can be cheaper to pay more tax or social insurance to purchase certain kinds of goods and services collectively. And of course, when we pay collectively, we all share the cost of our children from whose future contributions we will all benefit. When we pay privately, the burden of paying individually is placed squarely on the shoulders of young families, who are not the best placed to carry that burden.
If we see Universal Child Benefit being systematically dismantled in the next Budget (as is suggested in recent reports), while we retain tax breaks, such as those for private pensions that massively benefit people with the highest incomes, then the fundamental values underpinning Ireland's budgetary policy need to be questioned.
The next three or four Budgets are not just about closing the deficit, they are about the nature of the future relationship and social contract between citizens and the State in Ireland for decades to come.
Guest post by Arthur Doohan: The EU's FTT - a good idea badly done
Arthur Doohan: Tax policy in this jurisdiction is a mess and has been so for a long time. This mess has been a significant contributor to the State’s fiscal deficit through the use of ‘pro-cyclical’ transaction taxes and through tax-breaks that exacerbated pre-existing construction dependencies and excesses in the domestic economy.
I welcome TASC’s effort to debate and suggest much needed development in this crucial aspect of fiscal reform, especially in light of the regressive aspects of the last budget.
However, I am very sad to see another transaction tax being proposed and in a manner at odds with the quality of the rest of the analysis. I refer here to the Financial Transaction Tax (FTT) which has the superficial qualities of a betting tax in that it seeks to punish a perceived vice while raising lots of money for the Exchequer and, at the same time, making life harder for everyone’s favourite “scapegoat du jour”, the bankers and hedgefunds.
I am not against an FTT in principal. In fact, I support the idea. But I am against badly designed public policy of any type and the FTT as proposed here falls into that impractical category.
The core of the FTT idea is that low transaction costs and excessive liquidity facilitates speculative trading in markets dominated by financial corporations which leads to price gyrations that hurt the ‘real economy’ while generating ‘excess profits’ for the ‘players’ in these markets. An FTT, it is supposed, would ‘calm’ these markets while at the same time raising money that could better be spent by Government on ‘widows and orphans’. Derivatives trading comes in for especial criticism in this regard as a ‘smoke and mirrors’ ‘work of the devil’ excessive extravagance of markets.
The TASC paper supports the draft EU Commission proposal for a transaction tax on bonds and shares at 0.10% and at 0.01% on derivatives. No mention is made of foreign exchange or commodities trading. The report includes a sentence “The proposal (the EU Commission one) was focused on open market activities and movements (i.e. trading) and excluded inter-bank transfers and trades which might occur in the normal course for business.”
After this prescription several reasons are advanced in the report to support the introduction of the FTT. Firstly, to ‘establish real-time monitoring mechanisms for the various flows of financial transactions happening each and every day’. Secondly, to raise lots of filthy lucre for the Exchequer. Thirdly, to stop speculative trading, the bullying of small nations and profiteering that damages the ‘real and useful’ economy.
I should like to point out, before critiquing this proposal, that the root cause of the OECD economies problems was the repeated and consistent overvaluation of property assets (residential and commercial) and, in Ireland’s case, the attendant excess supply of same over the decade after the repeal of the Glass-Steagall Act. What systemic failures there were happened in the areas of securities ratings and poor legal administration; neither of which are remedied by an FTT. I am in favour of massive reform of how we do banking but, again, I would rather we have effective and productive reform than mere public whippings of various “Aunt Sally’s”.
On a first point, the rates suggested, while seemingly trivial, are in fact massive proportions of the current quoted prices. It is not made clear whether these rates are the total or the individual counterparty rates but it is clear that both sides to any trade are to be taxed. Even if it is the total due, where derivatives are quoted in spreads of 4 or 5 basis points (0.01% is a basis point), then a tax rate of 1 basis point is a rate of 20 or 25%. Where bonds are quoted in spreads of less than 25 basis points this is a 40% tax rate. Further, if derivatives are the real ‘bogeyman’, why are they being charged the lesser rate?
There is no explanation of why foreign exchange trading is excluded which is most odd since, despite our obsession with the evolution and fate of the ‘Euro’, the EU is still a multi-currency construct. Nor is there a rationale given for the exclusion of commodities which means that fuel oils and foods are not covered yet these are indeed major components of the ‘real’ economy.
Excluding trades ‘which occur in the normal course of business’ is meaningless and would provide a get-out clause for all and any trades since these are all transacted out using the same processes and settlements.
A further major omission is that there is no mechanism suggested where transactions by non-financial corporations for practical hedging purposes of the financial risks of the ‘real economy’ can be excluded from the tax net. So the FTT as proposed will fall equally heavily on those with genuine need but less financial expertise.
The suggestion that the authorities are not aware of market prices and flows is fatuous in the extreme. The Central Bank is a Bank and has its own dealing room and it participates daily in a small but distinct manner in the principal markets. In addition, there is a large and comprehensive reporting mechanism for most forms of transactions. Lastly, the ‘need for real-time monitoring’ argument is further revealed as nonsense in light of the fact that ALL derivatives settle at some significant date point after they are entered into so the need for 'realtime' data is superfluous.
With respect to the notion that the yield would be significant several points arise. This forecast makes the same error that the DoF was excoriated for over its dreadful VAT return forecast of the last budget. It is undeniable that anyone one who accepts the existence of 'elasticities' must accept that there will be a reduction in trading volume, especially as suppression of volatility is a prime aim of the tax. There is no assessment of the likely volume impact provided here or referenced. It is also suggested that the FTT tax would come out of profits and not be passed on to consumers. I am not aware of a single instance where tax burdens are not passed on to consumers and no mechanism is suggested that could ensure this result.
In the case of profiteering and speculating at the expense of small nations, it is in the nature of human beings to describe profitable trades as ‘investments arising from one’s own insight and inspiration’ and to attribute loss making trades to the ‘speculative actions of others’. Every transaction requires a buyer and a seller and as such implies someone who believes an argument/opinion and one who disagrees. Shorting of bonds or shares is not a unilateral action. Further, where 'short selling' has been banned it normally creates more sellers unsettled by the change in rules and the whiff of panic and, consequently, usually worsens the situation.
In capital owning democracies, people are entitled to decide whether they believe a governments policies are credible/effective and to vote with their assets if they disagree. Manipulating market rules to suit Govt. preferences is a form of censorship and suffers from all of the hypocrisy and ineffectiveness that goes with censorship.
I note also that the report indulges in discussing “the best place to use the additional resources an FTT would generate." This section smacks of counting chickens before they are hatched. More importantly, hypothecation of tax receipts is generally regarded as poor practice for a whole host of reasons .
Lastly, I would like to point out the complete absence of complaint or comment by the banks themselves on this topic.
Partly, of course, it is because they know that any such pleading on their part would likely harden hearts and prejudices against them. The real reason is because it will cost them practically nothing to circumvent the tax. The FTT makes explicit the intention to tax trades in their ‘domicile’. So, in exactly the same way as every trade executed on Wall Street is booked through entities in the Grand Cayman Islands, every trade in Dublin, London, Paris and Berlin will be routed through entities in Gibralter, Jersey or Malta the day after the legislation is passed and, consequently, hardly any ‘transaction tax’ will be collected. And this will happen without moving a single trader or company. The EU proposes to tax on the basis of residence but if the US authorities have not managed to shut down the Cayman loophole, I do not see how the EU with its vastly more complex legal hinterland will be able to do the equvalent.
This FTT proposal is long on wishful thinking, short on concrete details and absent a working knowledge of the operation of the market and its systems. Proponents of it need to "up their game" somewhat in order to have it gain serious consideration.
I welcome TASC’s effort to debate and suggest much needed development in this crucial aspect of fiscal reform, especially in light of the regressive aspects of the last budget.
However, I am very sad to see another transaction tax being proposed and in a manner at odds with the quality of the rest of the analysis. I refer here to the Financial Transaction Tax (FTT) which has the superficial qualities of a betting tax in that it seeks to punish a perceived vice while raising lots of money for the Exchequer and, at the same time, making life harder for everyone’s favourite “scapegoat du jour”, the bankers and hedgefunds.
I am not against an FTT in principal. In fact, I support the idea. But I am against badly designed public policy of any type and the FTT as proposed here falls into that impractical category.
The core of the FTT idea is that low transaction costs and excessive liquidity facilitates speculative trading in markets dominated by financial corporations which leads to price gyrations that hurt the ‘real economy’ while generating ‘excess profits’ for the ‘players’ in these markets. An FTT, it is supposed, would ‘calm’ these markets while at the same time raising money that could better be spent by Government on ‘widows and orphans’. Derivatives trading comes in for especial criticism in this regard as a ‘smoke and mirrors’ ‘work of the devil’ excessive extravagance of markets.
The TASC paper supports the draft EU Commission proposal for a transaction tax on bonds and shares at 0.10% and at 0.01% on derivatives. No mention is made of foreign exchange or commodities trading. The report includes a sentence “The proposal (the EU Commission one) was focused on open market activities and movements (i.e. trading) and excluded inter-bank transfers and trades which might occur in the normal course for business.”
After this prescription several reasons are advanced in the report to support the introduction of the FTT. Firstly, to ‘establish real-time monitoring mechanisms for the various flows of financial transactions happening each and every day’. Secondly, to raise lots of filthy lucre for the Exchequer. Thirdly, to stop speculative trading, the bullying of small nations and profiteering that damages the ‘real and useful’ economy.
I should like to point out, before critiquing this proposal, that the root cause of the OECD economies problems was the repeated and consistent overvaluation of property assets (residential and commercial) and, in Ireland’s case, the attendant excess supply of same over the decade after the repeal of the Glass-Steagall Act. What systemic failures there were happened in the areas of securities ratings and poor legal administration; neither of which are remedied by an FTT. I am in favour of massive reform of how we do banking but, again, I would rather we have effective and productive reform than mere public whippings of various “Aunt Sally’s”.
On a first point, the rates suggested, while seemingly trivial, are in fact massive proportions of the current quoted prices. It is not made clear whether these rates are the total or the individual counterparty rates but it is clear that both sides to any trade are to be taxed. Even if it is the total due, where derivatives are quoted in spreads of 4 or 5 basis points (0.01% is a basis point), then a tax rate of 1 basis point is a rate of 20 or 25%. Where bonds are quoted in spreads of less than 25 basis points this is a 40% tax rate. Further, if derivatives are the real ‘bogeyman’, why are they being charged the lesser rate?
There is no explanation of why foreign exchange trading is excluded which is most odd since, despite our obsession with the evolution and fate of the ‘Euro’, the EU is still a multi-currency construct. Nor is there a rationale given for the exclusion of commodities which means that fuel oils and foods are not covered yet these are indeed major components of the ‘real’ economy.
Excluding trades ‘which occur in the normal course of business’ is meaningless and would provide a get-out clause for all and any trades since these are all transacted out using the same processes and settlements.
A further major omission is that there is no mechanism suggested where transactions by non-financial corporations for practical hedging purposes of the financial risks of the ‘real economy’ can be excluded from the tax net. So the FTT as proposed will fall equally heavily on those with genuine need but less financial expertise.
The suggestion that the authorities are not aware of market prices and flows is fatuous in the extreme. The Central Bank is a Bank and has its own dealing room and it participates daily in a small but distinct manner in the principal markets. In addition, there is a large and comprehensive reporting mechanism for most forms of transactions. Lastly, the ‘need for real-time monitoring’ argument is further revealed as nonsense in light of the fact that ALL derivatives settle at some significant date point after they are entered into so the need for 'realtime' data is superfluous.
With respect to the notion that the yield would be significant several points arise. This forecast makes the same error that the DoF was excoriated for over its dreadful VAT return forecast of the last budget. It is undeniable that anyone one who accepts the existence of 'elasticities' must accept that there will be a reduction in trading volume, especially as suppression of volatility is a prime aim of the tax. There is no assessment of the likely volume impact provided here or referenced. It is also suggested that the FTT tax would come out of profits and not be passed on to consumers. I am not aware of a single instance where tax burdens are not passed on to consumers and no mechanism is suggested that could ensure this result.
In the case of profiteering and speculating at the expense of small nations, it is in the nature of human beings to describe profitable trades as ‘investments arising from one’s own insight and inspiration’ and to attribute loss making trades to the ‘speculative actions of others’. Every transaction requires a buyer and a seller and as such implies someone who believes an argument/opinion and one who disagrees. Shorting of bonds or shares is not a unilateral action. Further, where 'short selling' has been banned it normally creates more sellers unsettled by the change in rules and the whiff of panic and, consequently, usually worsens the situation.
In capital owning democracies, people are entitled to decide whether they believe a governments policies are credible/effective and to vote with their assets if they disagree. Manipulating market rules to suit Govt. preferences is a form of censorship and suffers from all of the hypocrisy and ineffectiveness that goes with censorship.
I note also that the report indulges in discussing “the best place to use the additional resources an FTT would generate." This section smacks of counting chickens before they are hatched. More importantly, hypothecation of tax receipts is generally regarded as poor practice for a whole host of reasons .
Lastly, I would like to point out the complete absence of complaint or comment by the banks themselves on this topic.
Partly, of course, it is because they know that any such pleading on their part would likely harden hearts and prejudices against them. The real reason is because it will cost them practically nothing to circumvent the tax. The FTT makes explicit the intention to tax trades in their ‘domicile’. So, in exactly the same way as every trade executed on Wall Street is booked through entities in the Grand Cayman Islands, every trade in Dublin, London, Paris and Berlin will be routed through entities in Gibralter, Jersey or Malta the day after the legislation is passed and, consequently, hardly any ‘transaction tax’ will be collected. And this will happen without moving a single trader or company. The EU proposes to tax on the basis of residence but if the US authorities have not managed to shut down the Cayman loophole, I do not see how the EU with its vastly more complex legal hinterland will be able to do the equvalent.
This FTT proposal is long on wishful thinking, short on concrete details and absent a working knowledge of the operation of the market and its systems. Proponents of it need to "up their game" somewhat in order to have it gain serious consideration.
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