The Robin Hood Tax – Summary

Business Tax: Reading Week Notes The Robin Hood Tax * The idea behind the RHT is to generate hundreds of billions of dollars * That money could be used to kick-start the US economy and get America back on its feet * The RHT = 0. 5% tax on Wall Street transactions * Benefits: * It won’t affect the vast majority of Americans * It’s easy to enforce * It’s tough to evade * It taxes those who are to blame for the global financial crisis, rather than the average American * It will help limit riskless speculation that threatens financial stability The RHT is seen as justified as â€Å"the banks can afford it† * â€Å"It’s not a tax ON the people, it’s a tax FOR the people† * It will be implemented using a Financial Speculation (or Transaction) Tax (FST/FTT) * The FST is a small tax of less than half a percent on trades in derivatives, stocks, bonds and foreign currency * With an FTT, a small percent (between 0. 005% and 0. 5%) of the value of the trade is collected in tax revenue The tax will deter the most risky transactions and prevent some of the â€Å"gambling† which helped trigger the financial crisis * Why is the RHT needed? The financial crisis has left a massive hole in the US’s public finances and this needs to be filled. The money raised will generate jobs and strengthen public services * The money can also be used to fund new Green projects to help curb global climate change * Disadvantages The article is incredibly biased so it downplays this point: the tax will affect regular investors as well which could discourage normal people from investing * The tax will affect the value of pension funds, possibly discouraging trading which would see the value of pensions of many normal American’s fall * Banks may just past the cost of this tax onto the consumer * The affected companies may just move their business offshore or start trying to avoid other types of taxes * The tax could alter dealing s between US firms and other foreign firms.For example, foreign firms will be less likely to invest in the US markets * Overall that article was disgustingly bias but it does make a good point of taxing those who have the money and those who have put America (and the rest of the world) in the global financial mess its currently in * The RHT is also sometimes incorrectly called the ‘Tobin Tax’. The Tobin Tax is basically the RHT except it focuses solely on taxing financial taxation between countries to reduce rapid foreign investmentPAYE System Benefits| | Disadvantages| Simple| | Lack of accuracy| Provides real-time information to the government| | Reliance on Tax codes| Unavoidable| | No P45 form| Reduced the tax forms for employees| | Does not include Benefits in Kind (BIK)| No bad debt| | HMRC mistakes| Carbon Emissions Trading Scheme Benefits| | Disadvantages| Incentives for businesses to become environmentally friendly| | How many permits do you issue? What is the upper limit of pollution? Who decides? Reduces carbon emissions| | Low emission companies will have no incentive to reduce emissions further| Tax revenue for government| | Complicated system| Incentivises businesses to look for more environmentally friendly fuel sources innovation| | Inconsistent system| | | Higher costs for businesses passed onto consumers? | UK VAT System Benefits| Disadvantages| Difficult to avoid| Costly to implement| Simple| Users must be ‘tax savvy’| VAT is transparent| Regressive tax|Price does not increase when VAT is added| VAT is inflationary| Fairness| | Huge tax revenue for government| | VAT may be selectively applied| | Cheap admin costs for HMRC| | More efficient tool for macroeconomic policy than income taxes| | VAT charged on sale VAT charged on sale VAT paid on purchases VAT paid on purchases VAT Due VAT Due Input VAT Input VAT Output VAT Output VAT Exempt| Zero rated – 0%| Reduced rated – 5%| Standard Rated – 20%| Financial services| Cakes| Energy saving materials that are permanently installed (e. . loft insulation)| Too much to list| Insurance| Basic food| Mobility aids for the elderly| | Betting & Gambling| First aid| Nicotine patches + gum| | Education| Books| Sanitary protection products| | Burials/cremations| Children’s clothes| Fuels| | | Public transport| Protective equipment e. g. baby car seats| | | Books + Newspapers| | | The supply is taxable Can reclaim ALL input tax paid The supply is taxable Can reclaim ALL input tax paid