Richard Murphy suggests we go read a report on financial transaction taxes written by one of his former colleagues which "adds useful data on volume trading in many financial markets".

Richard suggests that the report "makes claims for itself that the return does not quite fulfil". I'd go further - it's mostly rubbish.

It suggests that investment banks are ripping off their customers (mostly pension funds etc) by churning investments to generate commission for themselves. The financial transaction tax will stop this by making such trades uneconomic, or by levying a significant portion of the imputed profit into government coffers.

Firstly, churning is banned by the SEC. So if that's really what they're doing, they're breaking US securities law, which is not a good idea if they value their liberty.

Secondly, if banks' ill-gotten gains are generated solely from customer commissions, on what basis do these belong to the government? Surely they should be given back to pension funds?

There's one good line in the report though, which I'm sure Richard will cherish (emphasis added):

In the end, corporations do not pay taxes, people do. This is an oft-heard refrain in tax policy. It is true.

People who read this post also read:

• Murphy-hunting season closed
• Tax Journal on “government approved tax avoidance”
• Blowing my own trumpet: City AM on Barclays and tax
• In which Ritchie claims a voluntary disclosure scheme proves that voluntary schemes don’t work
• Is this Chris Dillow dissing Ritchie?

Filed under: Current issues, Economics, Other blogs, Regulation, Taxation with tags banks, richard murphy, sec, tax incidence, tobin tax