The Australian Bankers’ Association (ABA) has commended the Treasurer Wayne Swan for his move to rule out a financial transactions tax, describing it as "a sound policy position".

“Imposing taxes on the purchasing of shares and bonds and other financial instruments is simply a means by which Governments can raise revenue without being fully accountable for those taxes. It is viewed as a way of raising revenue ‘under the radar’.

“It is not a coincidence that European countries that are currently advocating financial taxes are those that are facing the greatest Government budget pressures.

“The Swedish Government in the 1980s experimented with a form of financial services tax and it resulted in Sweden losing financial business to London. The tax was deemed a failure and eventually abolished.

Steven Münchenberg, Chief Executive of the ABA said: “Financial services taxes are often marketed as ‘punishing’ bankers and financiers, but the reality is that the great bulk of financial activity in Australia is undertaken at the request and on behalf of households and businesses. Financial taxes simply form a cost to these user groups. For example, most stock transactions are undertaken by domestically-located superannuation funds and asset managers.”

Some proponents of financial taxes cite high frequency trading (HFT) as a reason why the taxes are necessary. They say that taxing every transaction would discourage high-volume trading and reduce market volatility.

But the Association said that is that infrequent buying and selling of assets is actually a cause of volatility.

 

“Rather, the greater the number of transactions, the lower the market volatility.

“Further, HFT businesses are highly nimble and can easily relocate to tax-friendly jurisdictions, whereas local superannuation trust funds do not have this flexibility.

“The Australian Government should be congratulated for its strong position on this issue. It has consistently opposed financial taxes in international forums.”