The Robin Hood Tax

I recently joined the organization Oxfam Canada as a volunteer. It is a refreshing experience being part of something that is so much bigger than oneself, but that shares one's mandate and mission in life.

Most of Oxfam's campaigning for the spring revolves around issues that will be/need to be discussed at the G8/G20 summits being hosted by Canada this summer. One of the biggest issues that Oxfam Canada, and other not-for-profit organizations as well as the public want to see discussed at the summit is adequate fundraising for international aid that was promised to Africa before 2015. Adequate and efficient fundraising.

The solution to this particular fundraising problem lies in the implementation of a tax, affectionately and popularly named the Robin Hood Tax, which would place a relatively small 0.05% tax on financial transactions conducted by investment banks. This tax, though small would help raise an estimated $350-600 billion annually, which would be directed towards both, stabilizing economies in the Global North, as well as for relief efforts in the Global South. The best part about this tax (as well as one there seems to be a lot of confusion about) as it seems to me is that it taxes banks, and not clients. The tax is on financial transactions conducted between banks (share transactions etc.), and therefore would not apply to daily transactions made by clients. The confusion about whether or not ordinary consumers would end up paying for this tax remains as one of the biggest misconceptions about this tax.

The arguments against the Robin Hood Tax are aplenty. Some economists argue that a tax like this would not work unless every government endorses and implements it. Banks will likely opt out of conducting transactions in markets that impose the tax, and take their business elsewhere. Canada and Harper are getting patted on the back for vehemently opposing the global bank tax (The Economist, Canadian Business etc.).

Because God forbid the rich should be taxed! My question is: If a 0.05% financial transaction tax can raise upto $600 billion annually, how much must the banks be making in the same duration?

Here are answers to some FAQs about the tax, courtesy of Oxfam Canada.