Excuse me, how many billions?

But how did they arrive at the approximated sum of "tens of billions dollars"?

In the Press Release on 19 December 2007 from the Bank for International Settlements in Basel (BIS), issued when the BIS published its most recent triannual report, we read that the:

• "[t]urnover in traditional foreign exchange markets increased by 71% between April 2004 and April 2007 to reach $3.2 trillion."
• "[a]ctivity in OTC derivatives markets was vibrant in April 2007. Average daily turnover in OTC foreign exchange and interest rate contracts went up by 74% relative to the previous survey in 2004, to reach $4.2 trillion in April."

The tax-rate proposed by German Finance minister Peer Steinbrück and by ENOFAD (the civil society coalition behind the letter to the G20 leaders), is 0,05 %. On the condition that the FTT would be compulsory and implemented on all the transactions covered by BIS in April 2007, this would give a revenue of 0,05 % * 1850 trillion = 0,925 trillion. That's not "tens of billions". That's 925 of billions dollars/year!

The FTT tax-rate which has been proposed by French minister of foreign affairs Bernard Kouchner, in turn, is 0.005 %. The yearly revenue, in this case, would be 0.005% * 1850 trillion = 92,50 billion dollars/year. But then, of course, the FTT à la Kouchner would not be compulsory. It would be voluntary.

Principles and policies are important, but so are facts and figures. I would be happy to know what persons who have a better command of financial statistics than myself think about the numbers I have quoted above. Do we know what we are talking about here? I am aware that the hasty calculations I have presented above may be grossly mistaken.* Anyway, I would like to see some well-founded calculations. Because, billions of dollars (be they counted by the tens, hundreds, thousands or tens of thousands) are also, in their own way, too big to fail , if I may use an expression which has been in frequent use lately about some American banks and insurance companies.

Further Questions:

1. Would the international trade in assets also be taxed? - If yes, the revenue would go up considerably. Here is an IMHO interesting recent quote from the website of Clearstream, the company through which such a great deal of trade in assets is flowing in these days:

   "For the first time in 2009, in August the total number of settlement transactions increased over the same period last year. This increase is primarily due to a 22% rise in international settlement transactions (2.33 million) compared to August 2008 (1.90 million). This figure includes the International Over the Counter (OTC) bond transactions that grew by 23% from 0.96 million to 1.18 million in August 2009. Of all international transactions, 71% were OTC transactions and 29% were registered as stock exchange transactions."

   Note that these are numbers of transactions, but not of the sums involved. The sums involved are most conveniently expressed in trillions of dollars per year, I would think.
2. Would the FTT be compulsory? - If yes, what tax authority would implement the FTT and see to it, that the tax is duly paid? Can an FT be implemented at all without the setting up of a new international organisation like the CTTO (or FTTO) as envisaged in the Draft Treaty on CTT by Patomäki and Denys (Cf www.nigd.org/ctt)? If, on the other hand, the tax would be voluntary, as Mr Kouchner and Mr Miliband seem to imply, would that FTT really be a tax at all? Would it not rather be a kind of charity, whereby banks, businesses and millionaires (and maybe even you and me, in case we buy a book from abroad every now and then, or similar) would kindly pay a "solidarity levy" of 0,005 % on their international financial transactions? Would such a contribution be generous enough to be called "a measure of political fairness and social justice" , as it is called in the letter to the G20 leaders?
3. Are the proposals by Kouchner, Steinbrück, Milband, Barroso et consortes, including ENOFAD, to be taken seriously?

To the
Leaders of G20 Countries

International Financial Transaction Tax on the Pittsburgh agenda

15 September 2009

Dear G20 leaders meeting in Pittsburgh,

The undersigned civil society organisations from across the world urge you to take steps at the Pittsburgh summit towards the implementation of an International Financial Transaction Tax.

Such a tax would be levied on all cross border financial transactions including currencies, equities and all kinds of derivatives. Even with a low rate of 0,05% such a tax could generate an annual income of tens of billions dollars.

This revenue could be used to pay for the cost of the crisis in the North, in particular the heavy burden of public debt, which has been accumulated to rescue the financial system. As well, to assist countries in the South to meet their development objectives, which have been thrown off track by the crisis. We are sure you agree that it is unacceptable for citizens in both the North and South to pay for the damage caused by the finance industry. Those who have benefited so much from the way in which the system has worked ought to be obliged to take responsibility for their actions. This tax is a measure of political fairness and social justice.

Furthermore, such a tax would contribute to a reduction in speculation, which was at the heart of the col-lapse of the financial system. The tax would thus enhance financial stability and prevent the finance in-dustry from continuing with a ‘business as usual’ approach.

Around the world national financial transaction taxes (FTTS) are commonplace on shares and bonds. Since these transactions are electronic, they are simple and inexpensive to implement. Payment of an International Financial Transaction Tax would thus be automatic with no scope for avoidance, even in off-shore centres. It could, in fact, be introduced unilaterally by those countries wishing to see it implemented; although it would be preferable that all major economies participate.

A measure of this type has recently gained considerable support from the German finance Minister, Mr Steinbrück and his colleague in the Foreign Office, Mr Steinmeier. Two weeks ago the head of the British Financial Services Authority proposed a tax on financial transactions to prevent excessive profiteering by banks. Governments in Europe and South America already have experience of specific FTTs, and parlia-ments in France, Belgium, Canada and Finland have considered implementing a tax on foreign exchange transactions. In 2005, at the United Nations 115 countries voted to explore the potential of taxing cross-border currency transactions.

One year after the collapse of Lehman Brothers now is the time to consider substantial reforms of the fi-nancial system. The introduction of an International Financial Transaction Tax would be a foundation stone in the building of a new and sustainable financial architecture.

Yours sincerely,