Saturday, August 29, 2009

Want control? Chuck sand in the wheels

It's called a Tobin Tax, and now the UK's top financial regulator, Adair Turner is proposing a tax on all financial transactions around the world.

"The purpose of this tax, he argues, would be to prevent the return of "business as usual" for the banking sector: "If you want to stop excessive pay in a swollen financial sector you have to reduce the size of that sector or apply special taxes to its pre-remuneration profit."

Gillian Tett can see the arguments.

And guess what?

So can our Reserve Bank's Assistant Governor (Financial Markets), Guy Debelle.

You can hear him saying so here, at slides 6 and 7:

"One of the objections raised to the Tobin Tax is that if it wasn't implemented in every single country in the world y0u'd see the whole of financial services shift to the Cayman Islands or the like where this wasn't there.

And that argument can always be put in the way of regulatory change, but to some extent, if you’re throwing sand in the wheels, then some of the sand is probably going to slow things down.

Yes, it's not going to be completely effective, the car’s probably still going to keep on driving, and there’s always going to be regulatory arbitrage, but that doesn’t mean you don't contemplate these sort of things."

Gee he makes sense.