PeterZ wrote:You keep citing the 10% transaction tax as if that's what is being assess to each participant in each transaction. It is not. Upon the final sale the effective tax paid on the complete transaction by the owner is less than 10% for positions that have show a gain.
For each transaction each participant only bears a 5% cost.
And any trading activity is meaningless without a minimum of 2 transactions. You have to get in, and you have to get back out. So splitting your 10% tax between the buyer and seller on each individual transaction so you can cite a 5% number rather than putting it all on one or the other in any given transaction is just shuffling numbers around.
Either it's all on the buyer and I pay 10% when I buy but nothing when I sell... or it's all on on the seller and I pay nothing when I buy and 10% when I sell... or it's split and I pay 5% but I pay it twice.
And yes the difference in the value between when I buy and sell will mean the total won't end up being exactly 10% in the split case, it could be either higher or lower, but it's going to average out to pretty damn near 10% and you know it or you wouldn't have used 10% in your revenue generation calculation. That 10% tax revenue doesn't appear out of thin air with nobody actually paying the 10%.
A calculation btw that depended on the number and value of transactions remaining steady when you impose the tax which is simply not going to happen.
Something like HALF of all those transactions are currently high frequency algorithm driven trades. Those vanish in an instant if you impose this tax before we even get into the crippling effect it will have on the number of slower 'manual' trades as well. You could argue that eliminating those computer driven HFTs is a good thing conceptually but that doesn't change that they just disappeared as a source of transaction tax revenue and just like that your country is plunged into crippling debt because you are nowhere near making up the revenue loss from eliminating income taxes.
So, let's assume the most tax avoidant participant, The hedge Fund manager, wishes to navigate this system. He opens his positon (buys) in London. The position is likely leveraged and so a small change in price generates a high return.
Ahem. A "small" change in price in his favor generates a large return *if* that change in price reaches the point where he makes back the loss from paying the transaction fee and begins turning a profit. Which means the larger your transaction tax the bigger that "small" gain needs to be before he sees any return at all.
On the other hand if it doesn't cover it, or if that small or not so small change is in the wrong direction, all that leveraging of his position he did is going to bite Mr. Hedge Fund manager's ass. Leveraging is not a magic "I'm going to make more profit and pay less taxes" wand. All it does is magnify both profit AND losses, and the net effect is going to be a wash. Or it would be, except with the transaction tax in place you're basically switching from making any investor have to pick a winner to making any investor have to pick a winner AND beat the spread. You are making it harder to get into profit at all.
Effect? Massive portions of that money is running for the hills and sinking itself in safer investments or savings vehicles. Transactions absolutely crater. Market decimated.