Proposed tax on forex trades to raise $50bn aid?
Hmm, more like proposed tax ruins perfectly efficient market. Well fairly efficient, anyhow. Saw this in the Sunday papers over the weekend when I was at the gym.
I do wonder on the credentials of politicians, especially ones that tax everything that moves. Forex trading is a tempting market given the quoted turnover of $1 quadrillion ($1000 million). But the reason this market is so huge is because of the amount of speculation that takes place. I know John at Juicestorm is a keen forex trader and, in fact, Betfair markets are very similar in terms of their function and use. There is a lot of activity at the money in the markets in the hope of scalping a few ticks here and there. But a lot of trades come to nothing or are closed out for a small loss. It’s a numbers game, trying to get the positives to outweigh the negatives. Some people scalp, some swing trade but over all there is mountains of activity right on the money and a lot of it is not value oriented but trading oriented.
The prime minister is under pressure from a coalition of UK and international campaign groups to back a 0.005% micro-tax on the market. It is estimated that it would raise up to $50 billion a year. The trouble is that money would effectively be a whopping rake on what is effectively a zero sum market. Margins are very tight in forex and any additional costs would ruin it as a trading market. If such a tax did happen then a whole legion of traders would get wiped out I suspect. If that happened, that figure of $1 quadrillion would shrink, raising less tax.
I think the trouble is these sorts of taxes are seen as quite soft as people wouldn’t see it in their pocket. It’s almost as bad an idea as rasing taxation and lowering limits on pensions at a time when pensions are underfunded. Boy are future generations going to pay for that!
Anyhow, I’ll keep an eye on this story. Can’t see it working to be honest!
Category: Using Bet Angel
