A tax on financial transactions, known as a “Tobin” tax, could protect superannuation investors, improve the operation of Australia’s capital markets and provide a source of tax revenue of over $1 billion per year, according to a policy brief from The Australia Institute.
Tobin taxes or some form of financial transaction tax are in effect in over a dozen jurisdictions internationally, including UK, France, Italy, Hong Kong and South Africa.
“Around the world we’re seeing countries implementing transaction taxes as a way to improve market stability,” said Cameron Amos, researcher at The Australia Institute and author of the paper.
“High Frequency Trading (HFT) creates instability which primarily hits retail – or ‘mum and dad’ investors, and super funds.
“Australia’s super funds and retail investors are losing up to $2 billion per year due to practices such as high-frequency trading.
“A Tobin Tax would encourage investors away from short term speculation and towards long term investment into the real economy.
“More than 1000 economists wrote an open letter to the leaders of the G20 demanding a Tobin tax.
“A micro-tax on transactions would reduce the ability of HFT traders to affect market prices and draw profit out of the market at the expense of super funds and longer term investors.
“Australia wouldn’t be the first to implement such a mechanism into the market, and we can learn from other countries. For example, the UK used a design which stopped ‘investor flight’.
“The world is moving to stem the excessive growth in speculation, but Australia has its hands over its eyes.
“Finally, and not insignificantly, a Tobin Tax in Australia would conservatively collect $1 billion annually. It would be both productive and a fair revenue measure,” Mr Amos said.