The NZX has reported that average trades increased in value in October by 56% to an eye-watering $207 million – per day.
That is $207 million worth of share transactions each day that no GST is paid on. For reasons that have never been made entirely clear, financial services, unlike other goods and services, are exempt from GST.
The government claims it is strapped for cash, especially when it comes to spending on essential services such as health, education, infrastructure, and social welfare. With the record-breaking turnover on the NZX, surely it is time to look at taxing financial transactions.
High-frequency share trading is carried out on the whole by offshore traders. It is non-productive trading. It is carried out solely to make money out of money. These shareholders care nothing about the businesses in which they buy shares. They may only own shares for a matter of minutes, long enough for the share price to rise slightly so they can make some profit. Why should they not pay tax on their transactions like everyone else?
$207 million per day taxed at the very low rate of say 0.05% suggested by the Robin Hood tax movement (in other words 5c per $100.00) would certainly not be small change. And that is only share trading; add in currency trading and other financial transactions and there is a potential source of revenue to rival GST.
How much better off the average New Zealander would be if a financial transactions tax replaced GST. A $200 grocery bill would attract a financial transactions tax of 10c instead of $30 GST. Low- and middle-income earners spend almost all of their earnings on living costs. Replacing GST with a financial transactions tax would add nearly 15% to their annual income. It would also relieve small business owners and the self employed of an expensive administrative nightmare.
Let’s talk about the stellar performance of the NZX. Let’s talk about taxing trading activities the same way everyone else is taxed. Let’s talk about getting rid of GST and replacing it with a financial transactions tax that is fairer for everybody.