We already pay a global tax, it's just hidden deep inside our domestic tax burden, but god help the first official UN tax man that steps foot on my property demanding the UN's fair share. He'll collect my payment in lead and spent casings.
EBUCK
god help the first official UN tax man that steps foot on my property demanding the UN's fair share. He'll collect my payment in lead and spent casings.
You won't ever see them coming. The Fed will be paying your share for you:
See Tobin Tax:
http://www.europarl.eu.int/workingpapers/econ/107_en.htm#chap3
III. The Operation of a Tobin Tax
The basic principles of the proposed Tobin Tax are relatively simple. A small ad valorem charge would be levied on every transaction involving the exchange of one currency for another. Professor Tobin's own original suggestion was for a rate of between 0.1% and 0.5%. Later he proposed as much as 1%; but most recently has suggested 0.2%. Other economists or politicians have proposed a variety of rates, some going as low as 0.01%.
A tax levied at this level would be of negligible importance for long-term portfolio or capital investment. A rate of 0.5%, for example, would add only 0.05% to the initial annualised exchange costs of a ten-year investment project.(20) By contrast, the tax would constitute an important extra charge on short-term transactions.
How the tax would work
Supposing, for example, that a speculator anticipated a rise in the Dollar against the Euro. He might enter a contract to sell, say, 1 million Euros for a week, receiving $1.1 million. If, over the week, the Dollar then rose to parity with the Euro, he would be able to sell the $1.1 for 1.1 million Euros, netting a 100,000 Euro (10%) profit.
No doubt this profit would incur some normal tax; but this would hardly constitute a deterrent to the speculation.
The Tobin Tax, however, would fall on the gross sums involved. At a rate of 0.5%, he would pay 5,000 Euros tax when purchasing Dollars, and another $5,500 (by then equal to 5,500 Euros) on resale: total tax 10,500 Euros, representing a tax of 10.5% on the realised profit.
Even when added to normal taxes payable, this would still hardly be a deterrent.
Supposing, however, that the anticipated currency movement did not take place, and that the $:i parity remained constant that week. The Tobin Tax would still be payable on the currency operations. In this case, the speculator would pay 5,000 Euros when buying Dollars, and another $5,100 at the end of the week: a charge of 1% on his capital. On a simple annualised basis (see page 18), this would amount to a tax rate of 52%.
Moreover, if the Euro actually appreciated against the Dollar - resulting in a loss on the speculation - the Tobin Tax (unlike any tax on profits) would still have to be paid.
Calculating equivalent annual tax rates A Tobin Tax on a one-day, one-week or one-month speculation, expressed as an annualised percentage rate, can be calculated in a number of ways.
The simplest - illustrated in Table 1 - is merely to assume that the same transaction is carried out every month, week or day of the year, and multiply the tax rate by two, for each leg of the buy/sell operation; and then by 12, 52 or 365 (Tobin's own original figures for one-day transactions, however, assumed only 240 trading days in the year ). A 1% Tobin Tax on a one-month operation would thus equal an annualised rate of 24% (1% x 2 x 12).
One alternative method would be to assume a given starting sum, which is then used for monthly, weekly or daily operations over a year, the sum diminishing on each turn by the tax previously levied. By this method a speculator starting with $100, who made monthly trades without profit or loss, would have just over $78.5 left at the end of the year, representing an annualised tax rate of just under 21.5%. Weekly transactions would leave just over $35, an annualised tax rate of 65%, (as opposed to 104% by the first method). After 365 one-day trades a fraction over 6.5 cents would still be left, a tax rate of 99.4%, (as opposed to the 730% under the first method).
The figures used by Eichengreen and Wyplosz in their 1993 Brookings Paper, however, are based on compound rates arrived at by the formula:
1 + R = 1 + (2T/100) P where R is the annualised rate of interest, T is the tax rate on a one-way transaction, and P is the number of transactions in a year. For a tax rate of 1%, this produces the following annualised rates:
monthly (12) 27% weekly (30) 181% daily (220) 7,980% The figures used were based 30 trading weeks in the year, and 220 trading days.
All these methods of course assume that the sums changed at the beginning and end of the operation are the same - i.e. that exchange rates have remained constant over the period.
This brief illustration highlights two important points.
- First, the effective annualised rate of tax on the capital sum involved would rise in inverse proportion to the turn-around period. An operation involving the purchase and resale of foreign exchange in a one-year period would incur a total tax charge of 1% (0.5% x 2); over a one-month period of 12%; over a one-week period of 52%; and over one day of 240% (see Table 1).
- Secondly, the tax would not necessarily make all speculation unprofitable; but it would raise the degree of risk involved. A higher movement in parities would be needed to make a given operation profitable; and the penalties for making a wrong bet would be increased.
Table 1: Simple annualised effective Tobin Tax rates for differing turn-around periods, assuming constant exchange rates (see also " Calculating equivalent annual tax rates"
Nominal Tax rate (%) Effective Tax rate (annual %) 1 day/ trading day* 1 week 1 month 3 months 1 year 10 years 0.01 7.3/4.8 1.04 0.24 0.08 0.02 0.002 0.05 36.5/24.0 5.2 1.2 0.4 0.1 0.01 0.1 73/48.0 10.4 2.4 0.8 0.2 0.02 0.15 109.5/72.0 15.6 3.6 1.2 0.3 0.03 0.2 148/96.0 20.8 4.8 1.6 0.4 0.04 0.25 182.5/120.0 26.0 6.0 2.0 0.5 0.05 0.5 365/240 52.0 12.0 4.0 1.0 0.1 1.0 730/480 104.0 24.0 8.0 2.0 0.2 * As formulated by Tobin, the annualised rate was calculated on the basis of what a round-trip would cost if carried out every day, on the basis of 240 trading days in the year.