Time for a ‘Robin Hood tax’ as banks roll in record profits?

Time for a ‘Robin Hood tax’ as banks roll in record profits?

While Malaysians are groaning as a result of high household indebtedness, not everyone is suffering. Some are laughing all the way to the bank – and some may be laughing inside the banks. Could it be time for a ‘Robin Hood tax’ on financial transactions (instead of the regressive GST)?

What exactly is a ‘Robin Hood tax’? For one thing, it is broader in scope than the Tobin tax.

Wikipedia explains:

The Robin Hood tax commonly refers to a package of financial transaction taxes (FTT), proposed by a campaigning group of civil society NGOs. Campaigners have suggested the tax could be implemented globally, regionally or unilaterally by individual nations. Conceptually similar to the Tobin tax, it would affect a wider range of asset classes including the purchase and sale of stocks, bonds, commodities, unit trusts, mutual funds, and derivatives such as futures and options. The Tobin tax was proposed for foreign currency exchange only.

A UK-based global campaign for the Robin Hood tax was launched on 10 February 2010[1] and is being run by a coalition of over 50 charities and organisations, including Christian Aid, Comic Relief and UNICEF.[2] The UK government published a response[3] favouring instead bank levies and a financial activities tax, citing the International Monetary Fund’s report to the June 2010 G20 meeting, “A Fair and Substantial Contribution by the Financial Sector”.[4] The Robin Hood tax campaign also supports both a Bank levy and a Financial Activity Tax, saying they are agnostic about the chosen mechanism providing it involves a sizeable transfer of wealth from the financial sector to the needy. However most of their campaigning efforts have focussed on the FTT variant.

By autumn 2011 the Robin Hood campaign had gained considerable extra momentum and support from prominent opinion formers, with a proposal from the European Commission to implement an FTT tax at EU level set to enter the legislative pipeline. The proposal, supported by eleven EU member states, was approved in the European Parliament in December 2012,[5] and by the Council of the European Union in January 2013.[6][7][8][9] The formal agreement on the details of the EU FTT still need to be decided upon and approved by the European Parliament, but it is expected to go into effect by the beginning of 2014.[10][11]

Meanwhile, Malaysians are grappling with rising household indebtedness and burdened by credit card debt, ‘ah long’ debt, car loans, housing loans (some due to speculation in property), personal cash loans, student loans, medical insurance premiums (payable to financial institutions), etc

Source: www.intellecpoint.com
Source: www.intellecpoint.com

Take for instance, quick cash personal loans. Over the last few weeks, I have been receiving calls from staff purportedly from a major local bank pestering me to take a personal cash loan apparently at a very low interest rate. I didn’t answer their calls after the first time, but that did not stop them trying to reach me on half a dozen subsequent occasions. I lodged a complaint with the bank, and after a couple of weeks, the calls gradually stopped. Incidentally, read this article: ‘Banks should not charge Ah, Long rates’ by S M Idris.)

In supermarkets, it is common to find oneself accosted by bank staff trying to push credit cards on you. On top of that, there are a widening array of bank charges for all sorts of things.

Meanwhile banks have benefited from the surge in housing loans, a lot of it due to speculation, relatively low interest rates, and driven by fear of inflation:

Source: http://www.intellecpoint.com/2013/06/the-growth-of-residential-properties.html
Source: http://www.intellecpoint.com/2013/06/the-growth-of-residential-properties.html

Speaking of our major local banks, how are they doing? These are some recent headlines:

CIMB post record profits

CIMB Group Holdings Bhd reported a record net profit of RM3.5bil for its nine months ended Sept 30, representing a 7.3% year-on-year (y-o-y) growth from a year earlier. The rise was in tandem with y-o-y revenue increase to RM10.87bil for the period under review from RM10.13bil previously (The Star, 19 November 2013).

Maybank’s 3Q profit rises 17% to RM1.8b

Meanwhile, Maybank’s cumulative nine-month (9MFY2013) cumulative net profit increased to RM4.82b from RM4.29b year earlier (The Edge, 21 November 2013).

Business Times (21 November 2013) reports: “Maybank posts record profits”

Public Bank net profit rises 6.8% to RM3b

KUALA LUMPUR: Public Bank Bhd posted a favourable set of results in the first nine months ended Sept 30, 2013, with net profit rising by 6.8% to RM3.04 billion.

The growth was derived from the group’s net interest income and finance income, which was driven by continued healthy loans and customer deposits, coupled with sustained strong asset quality, the bank’s founder and chairman Dr Teh Hong Piow said in an exchange filing.

“The Public Bank group delivered a favourable set of results in the first nine months of 2013 with pretax profit of RM3.97 billion…. This represent a growth of 5.7% compared with the corresponding period in 2012. Net profit attributable to shareholders grew by 6.8% over the same period to RM3.04 billion,” said Teh.

Gross loans had grown at an annual rate of 12% to RM215.6 billion as at Sept 30, 2013, compared with RM197.8 billion as at Dec 31, 2012, mainly arising from property financing, financing of vehicles and lending to small and medium enterprises. (Free Malaysia Today, 23 October 2013).

Against this, it has to be noted that Standard & Poor’s has cut its credit outlook for four Malaysian lenders “on concern that rising home prices and household debt are contributing to economic imbalances in the country. The credit ratings company revised its outlook to negative from stable for CIMB Group Holdings Bhd. (CIMB), AmBank (M) Bhd., RHB Bank Bhd. and sister company RHB Investment Bank Bhd” (Bloomberg Finance, 23 November 2013).

So what do you think? Is the ‘Robin Hood tax’ appropriate for Malaysia and the rest of the region?

Thanks to blog visitor looes74 for the heads-up about the Robin Hood tax and the video link.

Comments

comments

7 COMMENTS

  1. Household debts will be compounded by the shortage of Viagra Pills this festive season ??
    Najib (may have) asked Health Minister Subra to dispend all national stock of Viagra pills to MCA members to 4R (revitalise) their organs (or organisation) so supply demand problem will cause big price hike of viagra supply ?

    • The joke is that Viagra will not help if you have been castrated (to become political eunuchs) by your political master. The 4Rs are actually reminders from Umno Baru for MCA to Remember 4 times daily (during breakfast, lunch, dinner & supper times) who your master is!

  2. Robin Hood tax: Tax the richie, help the poor.
    It should have been done since the advent of currencies.
    As the controversial saying goes: Not all men are created equal. Shouldn’t we have a social system of redistribution of wealth? This is not a hand out habit of BeeEnders but a meaningful sharing of excessive profit-taking baring the temptation to make it in the Forbes’ list of the richest.
    It is much better than GST in many ways.

    On an individual basis, one can opt:
    Not to spend now but wait till the hard, cold cash in hand i.e. pay cash.

    Resist the covetousness habit, the buy now pay latter satisfaction BUT with sleepless nights & sweating over monthly transaction billings dissatisfaction of living.

    To live in simplicity meaning live with bare necessity / what’s essential + less hi-tech lifestyle (hi-tech is expensive).

    Be yourself, & not be possessed by Bin Chui Syndrome. Then only you will know what is essentially satisfying to your real needs/wants, what is being authentic as a person in social circles & what is self-esteem to your inner soul. Eg if you have no feel for social cycling on designer bicycle costing thousand of Ringgits, ditch the peer-pressured idea before it’s too late. Better go fishing alone & reward yourself with Koay Kow. The same for over-subscribed, annually incremental medical insurance which is more perceptual, fear-based (surreal?) on half-truths of your actual health status – pay yourself a ‘financially healthier’ life than pay the greedy, slick insurance guy.

    If you don’t have a daily convenient need for a slippery credit card, don’t carry one. RESIST like an exorcist. You may regret for the rest of your miserable life believing “Don’t Leave Home Without It”.

    My past experience: Whenever I walked into a bookstore (Popular or MPH), my long demised credit card started to jump & dance non-stop till I left the store with a mood-enhancing purchase. I learnt an expensive lesson not to be deceived by purchasing power on credit. Cash is King, Credit is Slavery (sooner or later).
    Now I am happy master of my own destiny with absolutely zero credit purchase bills to pay, no haunting covetousness to deal with.
    Time for a happy good morning Kopi-O kau kau & freedom to live my life as I dictate it.

  3. I think I would like to take on the contrarian role this time.
    Banks are in the business of making money with very diverse shareholders including various pension funds. Their well being and profits enables our pension funds to build the nest egg of millions of Malaysians. Also, many ordinary folks invest in this blue chip companies to beat the inflation. Not all of us can afford property investment, but with banks you can have relatively safe and descent returns for as little as a few thousand ringgit.
    Secondly, I don’t think that our banks have been taking huge risks and making obscene amounts of money like their counterparts in the US and Europe. When many western mega banks got “slaughtered” a few years ago (eg Lehman Brothers, Citibank, etc), our banks were conservative and were unscathed (they learned from their mistakes in the late 1990s).
    Thirdly, like any business, there are risks, and banks can suffer ups and downs. And like it or not the top 4 or 5 banks in the country are the solid bedrock of our economy and its wellbeing. And must not be taken over by foreign banks.
    I know our banks do emphasize on profit too much. But I feel the pros override the cons. And if you want to do something about it, buy a stake in the bank, and be a activist shareholder with other minority shareholders.

    • Appreciate some of your points. I think though we also have to consider the role some of the banks have played in facilitating property speculation, which has driven up the cost of living for many Malaysians.

  4. Notice the vague use of the word agnostic, with no intention to clarify why the party saying this (even that is not clear) is on the fence. Also note the use of the scare phase “wealth tansfer.” This is similar to the hysteria that socialism is communism. Most of the establishment press in Britain is no different from that in USA. They are faithful mouthpieces of the super-rich. Even daring to suggest 0.01% tax on speculation is taboo. EU is losing patience. Meanwhile, the rest of us are frequently charged 1-2% as fees by EACH service provider in ESSENTIAL transacions.

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