The Robin Hood Tax

As new research from CPJ demonstrates, the poor bore the brunt of the recent recession. In Canada, hundreds of thousands lost their jobs and were left at the mercy of inadequate Employment Insurance and social assistance. Globally, millions suffered from rising unemployment, deep financial uncertainty, and high food prices. Yet it was not the poor that caused the economic downturn.

The economic crisis was caused by financial activity – speculation – taking place far from the everyday lives of the poor. The banks and financial institutions and other actors involved in creating the speculation bubble have taken their bailout and moved on into recovery. The poor are still waiting for their recovery.

This situation represents a fundamental economic imbalance. We have an economy of greed and inequality instead of an economy of care. We have an economy that perpetuates poverty instead of an economy of abundance. We have an economy of individual self-interest rather than an economy of enough. We need to re-capture a covenantal understanding of economics that makes love of neighbour and God’s call to justice its defining precepts.

As we approach the G8 and G20 meetings later this month, a global campaign has arisen to promote one small step towards a covenant economy: the Financial Transactions Tax, sometimes called the Robin Hood Tax.

The Financial Transactions Tax would levy a very small tax, 0.05%, on all financial market transactions between financial market actors (so ordinary consumer transactions would not be included). The impact would be to lessen harmful and destabilizing speculation by adding an additional cost to dissuade short-term speculation, while also generating revenues to mitigate the economic harm caused by speculation, greed and economic crises.

Estimates suggest that even with a reduced volume of market transactions, the tax could still generate more than $600 billion a year. The Robin Hood Tax campaign proposes that one-quarter of these funds would go towards supporting the Millennium Development Goals; one-quarter would go towards international climate change programs; and the remaining half could be used for stimulus or to reimburse governments and taxpayers for their bailout of financial institutions.

The proposal has support from former UK prime minister Gordon Brown, French president Nicolas Sarkozy, German Chancellor Angela Merkel, and Speaker of the US House of Representatives Nancy Pelosi. Hundreds of economists have also supported the idea, including Paul Krugman, Joseph Stiglitz, and Jeffrey Sachs.

Unfortunately, the International Monetary Fund has voiced its disagreement, while still supporting a levy on banks to counter the costs of future bailouts. Most disappointingly, Canada has been the most aggressive international campaigner against any kind of bank tax. Our role in hosting the G8 and G20 should be a moment of international leadership. Instead, we are coming across as international laggards.

For more information on the Robin Hood Tax campaign and to send a message of support to Canadian politicians, check out the Canadian website. Kairos also has a briefing paper available which provides more details on the proposal and its likely impacts.