Over the past couple of weeks, the Robin Hood Tax campaign has been hitting headlines across the globe. However, it’s not all positive, and some of those arguing against moves to introduce an FTT are trotting out the same tired example of the unsuccessful Swedish FTT as ‘proof’ of why an FTT would never work.
There’s lots of evidence to show why the FTT would work, be easy to implement, and raise billions for good causes. There are also examples of dozens of FTTs across the globe which can show us just how easy and successful FTTs can be (including 7 of the G8 countries). Indeed one of the most successful FTT is the UK’s stamp duty.
But let’s look at the Swedish example a little more closely to see what opponents of the FTT are worried about.
The Swedish FTT was first introduced in 1984 and scrapped in 1991. Most experts agree it wasn’t a particularly successful FTT and did lead to a reduction in trades made in Sweden. So, does this mean that critics of the Robin Hood Tax are right and that, if we don’t want trading to go elsewhere, we shouldn’t introduce the FTT?
Well, to put it simply, no: they’re not.
Let’s look at the UK as an example to compare with the Swedish case.
The UK stanp duty falls on shares. If you sell a share of a UK-registered company, you pay a small FTT of 0.5% on the transaction regardless of where you are in the world. So, it’s an easy tax to implement and difficult to avoid.
However, the Swedish FTT was only imposed on transactions which took place in Sweden. If the transaction involved a Swedish company but was made outside of Sweden, the transaction was exempt from the tax. This meant that many trades were simply made elsewhere to avoid paying the tax, regardless of whether they involved Swedish registered companies.
Ultimately, the Swedish FTT was badly designed and therefore not very effective. But to say that just because there were flaws in the Swedish FTT that all FTTs won’t work is a bit of a slippery slope argument that doesn’t really work.
It’s a bit like making a sponge cake without any raising agent. It won’t work, but that doesn’t mean that the idea of a sponge is a bad one. Simply by changing the recipe slightly, you could have the perfect sponge.
The Swedish FTT wasn’t designed well, but with better design it could have been a great tax.
Just like the Robin Hood Tax – a great tax whose time is now.