
Schaeuble Seeks Decision on EU Financial Transaction Tax in 2016 - Tomte
http://www.bloomberg.com/news/articles/2016-10-11/schaeuble-seeks-decision-on-eu-financial-transaction-tax-in-2016
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Animats
The EU Tobin tax proposal got unstuck? That's great. This is a small tax on
financial transactions - 0.1% on shares and bonds, and 0.01% on derivatives.
It's not primarily to raise revenue. It's to kill high-frequency trading and,
overall, substantially reduce the amount of unnecessary trading. This should
force financial markets to think in terms of longer term goals. (Like a day,
rather than a minute, probably.)

Think of it as a tax on zero-sum financial activity.

If the EU does this, the US should. China's government likes the idea and
would probably go along; they hate financial volatility. With all the big
players on board, the financial system should generate less noise.

~~~
sien
From : [http://deeconometrist.nl/?p=3623](http://deeconometrist.nl/?p=3623)

"Before the rise of HFT, when old school brokers were the ones doing the
market making on the trading floor, the difference between the buy and the
sell price was about twenty-five times larger than it is today."

The other thing is that HFT firms make less money all together than Goldman
Sachs does on its own:

"From 2011 onwards, HFT has been on the decline. In 2009, high-frequency
traders moved about 3.25 billion shares a day. In 2012, it was 1.6 billion.
Not only did the trade volume decrease, HFT firms profit has also been
diminished since its heyday. In 2009, the entire HFT industry made around $5
billion trading stocks. In 2013, this was around $1.3 billion before expenses.
Today, HFT companies seem to disappear just as fast as they appeared. Its most
notable case might be that of Goldman Sachs selling its HFT department
recently. This department, which it acquired in 2000 for $6.5 billion, yielded
them a mere 30 million this present day."

The big investment banks hate HFT firms because they have destroyed their
spreads on trades. They push out arguments to get rid of them so they can
return too the good old days of making sure they get a cut of each trade.

Who pays the Clintons hundreds of thousands for a 'speech'? The investment
banks. Not HFT firms, they make too little money and compete too hard.

~~~
tombone12
Wait, are you saying HFT are great and should be kept because their business
model looks like its collapsing?

~~~
positr0n
No, he's saying HFT are great and should be kept because they are a net gain
for society. They lower spreads and take margins away from the huge players.
So much so, that the big players are lobbying for taxes like this to make HFT
less effective so they can make more money for themselves.

HFT is just another example of software eating the world and doing a job that
used to be done by humans more efficiently. This is a good introduction to the
mechanics of what HFT is, written by... yummyfajitas on HN I think?

[https://www.chrisstucchio.com/blog/2012/hft_apology.html](https://www.chrisstucchio.com/blog/2012/hft_apology.html)

------
lordnacho
"The financial industry" is a very large beast. Even "derivatives" is a very
large beast. It makes no sense to go for the industry as a whole when only
some section of it was responsible. Mainly mortgage securitisation and
distribution. What on earth do guys trading index futures have to do with the
crisis? I used to trade listed derivatives, and we never ran into anyone to do
with mortgages.

Also, it's worth considering the effects. If you do a FTT, the trading goes
elsewhere, or it dies. You won't get nearly as much money as (current size) x
(proposed tax rate).

If you want to protect the world from another mortgage meltdown, there are
other ways to do that. You could restrict loan-to-value ratios. Or force banks
to hold more collateral. These types of things are not unknown.

~~~
conistonwater
> _The European Commission, the EU’s executive arm, first proposed the tax in
> 2011 to make sure the industry paid its fair share after the costs borne by
> taxpayers during the financial crisis._

This sentence in the article makes it sound like they are not specifically
going after the causes of the Great Recession, but the finance industry in
general, but I'm not sure. In any case, it doesn't seem to be aimed at
mortgages at all. Maybe reducing the amount of trading and finance is the
point?

~~~
petre
They are going for everything and everyone. The hunt for taxes has begun. Of
course it's all being trumpeted as "tax the rich" now, but they will come for
you, eventually. In fact they already do with negative interest rates, which
are essentialy a tax on money.

As the parent points out, capital will just move elsewhere.

~~~
saiya-jin
why the downvotes? this is exactly happening, at least in EU (taxes on
anything considered wealth - cars, properties etc. have you ever heard of any
tax rate going down or be abolished, for example property inheritance tax? up
to 50% in France for example)

and to some extent to US (ie FATCA double taxation for US expats that don't
live in US for years but still hold the passport)

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nul_byte
Interesting time for them to be pushing this, considering the EU thinks it may
take business from London due to loss of passporting over Brexit. It could now
reverse with firms leaving the EU to avoid the transaction tax.

~~~
golemotron
That's why it's being floated as a trial balloon to see what the reaction will
be.

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hal9000xp
Sweden has already tried to impose financial transaction tax in 1980s and
miserably failed:

[https://en.wikipedia.org/wiki/Swedish_financial_transaction_...](https://en.wikipedia.org/wiki/Swedish_financial_transaction_tax#Market_reaction)

This is bad news for EU and good news for Singapore, Hong Kong and other more
pro-free-market countries. These socialists often forget that there is a
global competition between countries for capital and investors.

Financial transaction tax will decrease liquidity, increase spread, increase
volatility and decrease volume.

And EU won't going to attract new long term investors either because EU isn't
growing at all (thanks to high taxes and excessive regulation). Do you want to
buy EURO STOXX 50? I don't.

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patall
Can someone explain reasons for not having a FTT? I mean, there is no reason
for Company X to move their trading to another country as the (non-hedgefound)
owners of it do not gain anything from it. I mean the financial industry does
not create any value through high volume trading, so while there is much to
gain for the individual, for us as a society there is nothing positive about
it at the risk of higher volatility and rapid market reactions. Or to phrase
it different: why should I as someone with 100 GE or EADS shares be against a
FTT?

~~~
hardlianotion
As stated in the article, the intention of the tax seems to be to ensure
financial services industry contributes their fair share of tax payers
contributions to bailouts. I don't see how this is guaranteed - it seems more
likely that costs of doing business will be passed to end users. More likely
is a general slowdown of business - maybe that is the goal of the project.

My other comment is a bit of a nitpick. I don't think it good sense to
implement a new tax on the basis that you don't see good arguments against. I
think rather that you need strong arguments for.

~~~
patall
I thought the main reason for it was more regulation of high frequency trading
and its adverse effects on market stability. Making money from it is a lower
priority, thats what capital tax is for.

------
kukx
The European Union is looking for a way to fill the budget hole that will
inevitably appear after Brexit. The current EU budget is set for years
2014-2020 and Great Britain is the third largest net contributor to it, behind
only Germany and France.

Fixing the budget may get nasty, since the EU countries may have to increase
the contributions or slash the expenses or EU bureaucrats may have to accept a
decrease in wages. Net contributors like Germany or France will not want to
contribute more, since they have their own problems to solve internally and
the nationalist parties are on the rise there (Marie Le Pen and Alternative
fur Deutschland). If the budget is decreased it will further alienate the East
and South European countries. And euro bureaucrats will not simply accept
smaller wages.

Also after Brexit the average EU income will decrease so some regions may no
longer qualify for subsidies. Slow economic growth, European banks problems, a
migration crisis, Germany's wealth dependency on export that is expected to
falter, a conflict with Russia, all this won't help in finding a new,
acceptable budget.

In the current situation the EU is ready to embrace any solutions that will
increase the budget without causing too much friction within the bloc. FTT
seems to meet this goal.

~~~
airesQ
The EU budget is relatively small, at €185 billion. UK's net contribution
amounts to £8 billion, a bit, but not earth shattering.

This Tax won't apply to all members, just to the ones that opt-in (Austria,
Belgium, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and
Spain seem to be interested). And from what I understand, any revenues
steaming from the tax would go to national governments and not the EU budget.

~~~
kukx
> ... not earth shattering

In 2015 the revenue from the UK constituted 15.6% of total EU revenues for
that year. It's a significant share.

> ... the tax would go to national governments and not the EU budget.

In 2012 the Commission recommended that two-thirds of the revenues from the
FTT should go to the EU budget and the remaining one-third should be retained
by the EU Members. It's reasonable to think that at least some portion of this
tax will go to the EU budget directly.

------
glasz
this is special interest tax with exemption an whatnot. today it'll be a low
percentage and limited to certain financial products. tomorrow, i assure you,
it'll be everything and the rate will be raised.

does any non-german even know who schäuble really is? do you know he was front
and center of the so-called "donation scandal" of his party, the cdu, around
2000? that he "allegedly" reveived 100.000 dm from a german defense industry
lobyist? that investigations didn't lead anywhere but nobody knows where the
money ended up despite the fact that multiple ppl dealt with the envelope?

[https://en.m.wikipedia.org/wiki/CDU_donations_scandal](https://en.m.wikipedia.org/wiki/CDU_donations_scandal)

do these things and you'll end up in prison.

there's absolutely nothing great about this union, this country and my fellow
countrymen in this regard. things lay clear in front of them and they do shit.
only care about soccer, beer and the price of milk.

schäuble is a sick, angry bastard fucking around with his constituency and
they don't get it.

