In a 9/25/09 FT op-ed, Peer Steinbrück, Germany’s finance minister, argues for “a global financial-transaction tax, applied uniformly across the G20 countries.” His proposal encompasses all financial products, not just those that are traded on exchanges, and would presumably include the more exotic private contracts like credit default swaps (CDS) and credit default obligations (CDO).
Using calculations by the Austrian Institute for Economic Research, Steinbrück proposes that a .05% (20 basis points) tax on financial products would raise $690B a year, about 1.4% of world GDP. Applied uniformly across the G20 nations, it would create a level playing field for all market participants.
But wouldn’t this give those markets outside of the G20 an unfair advantage? Steinbrück relates that G20 and EU exchanges account for 97% of equity and 94% of bond trading volume in the world.
In essence, this tax would be an insurance fee paid to the taxpayers of the G20 countries who have proven to be the insurer of last resort for “Too Big To Fail” institutions throughout the world.