Robin Hood Tax FAQs

The Robin Hood Tax is the popular name for the ‘financial transactions tax’ (FTT) – a small tax on the transactions of finance firms, rather than individuals, which are carried out millions of times a day.
The UK currently has an FTT of 0.5% on share transactions, which raises £3.7 billion a year. Our proposal is to modernise this tax, closing loopholes and extending it to cover other assets, such as bonds and derivatives. This would raise an extra £5 billion a year – £25 billion over the course of a parliament – to fund public services and create jobs in the UK, help meet basic needs abroad and fight climate change.

Stamp Out Poverty’s proposal to modernise the UK’s current FTT on share transactions would raise an extra £4.7bn a year – almost £25bn over a five year Parliament.

As an example of the kind of benefits this additional revenue could generate: the money raised from just one year of this Robin Hood Tax could reverse austerity for the NHS, plug the social care funding gap, hire 20,000 new teachers, with money left over to build 50,000 affordable homes.

Our Robin Hood Tax proposal closes existing loopholes and extends the tax from share transactions to a much wider range of financial assets, including trades by banks, and trades in company bonds and derivatives, by UK residents. It could be further extended to tax trades of sterling, and of foreign currencies by UK residents, to raise even more money.

The last financial crisis was caused by the banking industry, not ordinary people, but the costs were pushed onto us. People lost their jobs, businesses and savings. Incomes froze as the economy ground to a halt – and have still not recovered. The Government cut £50bn a year from public services, and another £30bn a year from social welfare, pushing our NHS, schools and local councils to breaking point, and hitting the most vulnerable hardest.

In contrast, in response to the crisis, the government found vast sums to rescue large financial firms from the results of their own greed. UK banks took over £130bn from taxpayers in bailouts. Since that time, banks have continued to extract huge profits. Over the past decade, the four biggest UK banks have made over £160bn in profits and paid out over £50bn in bonuses.

Since the financial crisis:

• The average UK taxpayer has lost out on a total of £26,000 in earnings
• A GP practice has been closed EVERY TWO DAYS
• ONE IN TEN hospital beds have closed
• Over A MILLION older people now do not get the help they need with everyday tasks
• Each family affected by disability has lost on average £2,500
• ONE IN THREE children now live in poverty – HALF A MILLION more than previously
• Rough sleeping has more than DOUBLED

It is only right and fair that the burden of paying for the last financial crisis is placed where it belongs. It is high time for the banks to bear the cost of their actions. The modernised Robin Hood Tax we propose, by raising an additional £25bn from this industry over the course of a parliament, helps achieve this.

Our supporters are part of a movement stretching across 15 countries around the world, and have already taken over a million actions.

The Robin Hood Tax is backed by:

• Politicians all over the world including Chancellor Merkel of Germany, US Democrat Senator Bernie Sanders, the Leader of the Labour Party in the UK, Jeremy Corbyn
• Celebrities including actors: Emma Thompson, Bill Nighy, Andrew Lincoln, Noel Clarke and Tom Felton
• Leading economists and financial experts, including Nobel Prize-winning former World Bank Chief Economist Joseph Stiglitz, former Financial Services Authority Chairman Lord Turner, economist Paul Krugman, and Earth Institute Director Jeffrey Sachs
• World-leading investors like George Soros and Warren Buffet
• Religious leaders including Archbishop Desmond Tutu

In the UK, we are supported by over 100 organisations:

• Charities and faith groups including Oxfam, Christian Aid and Barnardo’s
• Environmental groups including Friends of the Earth
• Trade unions including UNITE, UNISON and the NEU

Some critics say of the Robin Hood Tax that unless it is introduced globally, it will be avoided. However, the FTT cannot be avoided if it is designed properly. This means taxing ‘what’ is being traded or ‘who’ is doing the trading, not ‘where’ the trade is taking place. Designed like this, the geography of the trade becomes irrelevant to the capture of the tax, making relocation of activities pointless. The recent automation of financial markets makes evasion extremely difficult and revenue capture inexpensive and efficient for tax authorities.

In fact, numerous countries apart from the UK have FTTs, including India, China and the US, as well as financial centres like Hong Kong and Singapore. Currently, 10 European countries are negotiating a regional FTT, including Germany, France, Italy and Spain.

The financial sector made profits of £80bn in 2016¹ and does not pay VAT. Bankers’ bonuses since the financial crisis have topped £100bn² across the sector – including over £50bn at the four biggest UK banks alone. Less than one in six UK voters believe that the financial sector cannot afford to pay more.³

The cost of the Robin Hood Tax will fall on those who trade the most often. This includes banks and other financial organisations, who make millions of transactions every day, and wealthy individuals who own financial assets, on whose behalf banks also trade. Most UK citizens do not own, or regularly trade, financial assets and so would not pay the tax.

Pension funds do not trade often, in comparison with banks and other financial organisations, such as hedge funds. In fact, they only ‘turn over’ their holdings of financial assets on average once every two years. This means that the amount of tax they pay will be negligible and be outweighed by the growth in the value of their portfolios.

Since the Robin Hood Tax falls most on those who trade the most often – banks and other financial organisations that make millions of trades a day in pursuit of quick profits – it helps put a brake on the sort of short-term speculative trading that contributed to the last financial crisis. The Robin Hood Tax would especially impact ‘high frequency trading’ (HFT) – automated computer trading that can create massive market instability – by increasing costs sufficiently to reduce the volume of transactions.

Banks are increasingly creating new, risky ways to trade that involve many steps – called a ‘chain’. This lets them take a cut at each step, increasing profits. Less risky, more traditional ways to trade can be carried out without creating a chain. As the Robin Hood Tax would tax each step in the chain, it incentivises banks to return to safer, more traditional ways of trading.

The finance industry has used the uncertainty surrounding Brexit to threaten government not to burden the sector at this time with greater taxation of the sector, such as the FTT, or they may relocate their activities to another country. However, the rate of the Robin Hood Tax at a fraction of 1% would be a marginal increase to the cost of business and not tip the scales in respect of the relocation of a financial business. Decisions of that magnitude would instead be a consequence of what the eventual terms of a Brexit deal between the UK and the EU would actually be for the financial sector in terms of market access and opportunities to do business.

Since the financial crash, the four biggest banks have paid out over £60bn in fines and compensation. These relate to misconduct ranging from rigging LIBOR rates, to mis-selling Payment Protection Insurance (PPI) and risky mortgage products, to laundering money for international drug dealers, to pushing small businesses into bankruptcy and looting their assets. At a local level, at least one bank branch has closed across the UK every day for the last 10 years. Lack of government intervention has allowed UK banks to lend over £150bn to fossil fuel companies, financing activity which is heating up the planet; and failure to rein in risky behaviour means that debts held by banks – the kind behind the last crisis – are at record levels again, with experts warning that we’re sleepwalking into another crisis.

Harnessing the financial might of the banking industry for the good of people and the planet, shifting their incentives away from a solitary focus on short-term profits, is surely an urgent challenge and major opportunity for governments and political parties in coming years.