Madam Speaker, I was delighted to hear my colleague from Bruce—Grey. I have not heard him speak often, as he mentioned, but I wish he would do so more often. He certainly provides an excellent view on this subject. I also enjoyed his member's statement yesterday. He was on all the national networks mourning the loss of the rodent in his riding.
I am here this evening to talk about the motion of my hon. colleague from Regina—Qu'Appelle on the financial transactions tax, that in the opinion of this House the government should show leadership and enact a tax on financial transactions in concert with all OECD countries.
Like many ideas that come from my colleagues in the aging New Democratic Party this is a noble one I think with a good purpose and a thoughtful objective in mind, to find some way of governments imposing some discipline on the increasingly unwieldy currency and financial exchange markets which really seem to many of us to be out of control at times. I think we, like all Canadians, share at times a feeling of helplessness as we are adrift on the sea of trillions of dollars being exchanged daily across the world electronically, affecting our standard of living, affecting the value of our currency, affecting our international purchasing power and yet to a very large extent beyond the control of us as individuals or as communities or as government. So I recognize the frustration which gives way to the kind of impetus we see behind this motion.
It would be wonderful if we could find a fiscal policy lever, a tax if you will, to slow down the sometimes destructive and irrational nature of these speculative currency markets. That I admit. It would also be marvellous if we could live in a world where everybody had a marvellous standard of living where there was no poverty, no unemployment and no economic inequities. But unfortunately that is not a world we live in and it never will be. That is a Utopian world. There are some things which government simply cannot do. One of the iron laws of economics is that people will generally act in their own self-interest and maximize their own returns. This is an irrefutable fact of economic history.
Essentially what I am saying is that the imposition of a financial transaction tax proposed by this motion would be unworkable, impractical and would create unintended consequences that would be far more devastating on developed countries like Canada than are the current vagaries of the currency exchange markets.
One example springs to mind about the kind of perverse unintended consequences that result from governments when they choose to establish certain outcomes through tax policy. In the 16th century in England the crown was looking for an efficient way to tax people based on their wealth.
The tax collectors then noticed that wealthier people tended to have homes with a relatively new luxury of windows. Lovely Tudor homes with windows were being built throughout the land. The tax collectors decided to advise the crown that they should impose a window tax. It was a brilliant idea to soak the rich. The 16th century version of the NDP said “Let's soak the rich and redistribute that income. Let's have some Robin Hood economics here in jolly old England”.
They imposed this punitive tax on windows. The tax collectors went around from town to town and county to county and counted how many windows people had in their homes and assessed a levy based on how many windows they had. Inevitably we can imagine the consequences which tax collectors could not possibly imagine in their linear minds. What happened was that everybody throughout the land boarded up their windows and darkened their homes to avoid the taxes they would otherwise have to pay.
This marvellous new innovation of Renaissance architecture, the window, became blackened and covered up because of a punitive tax which was designed to achieve some kind of equity. To this day in some small villages in England we can see what were once framed as windows covered up by plaster. To this day we still see the unintended consequences. That is the kind of natural, inevitable, historical, human reaction to the effort by the state to impose taxes on people to penalize them for certain activities.
We have seen this in more recent history where other developed economies have tried to impose financial transaction taxes such as the one contemplated in this motion. We have seen that jurisdictions such as Brazil, Sweden, Japan, Germany and Switzerland, all in the past five years or so, have removed or eliminated financial transaction taxes which they had at one point levied principally on the trading of equities and other financial instruments. The United Kingdom, while not yet having eliminated the FTT which it imposed on the registration of securities, cut it in half back in 1986.
Why did all these countries that were theoretically generating revenue from this painless small levy on financial transactions end up eliminating it? What they found was much like the window tax, that these financial transaction taxes were counterproductive.
By imposing a levy on securities and equities and the trading of those instruments there was less activity in their equities market, less securities were being registered. Why? It was because investors acting rationally in their own self-interest moved their financial investments, their equity tradings and so forth into other jurisdictions.
The tax base which these governments had sought to derive revenue from began to diminish. By imposing a tax not only did the revenues from that source decline year after year as investors moved more capital trading out of the country, but it became completely counterproductive because all the FTTs in various jurisdictions had a dampening effect on economic growth.
There is absolutely no doubt that we would see a similar unintended consequence were Canada and other OECD countries to impose an international tax along the lines proposed by economist James Tobin in his now notorious Tobin tax. There is no doubt that it would be impossible to compel every national jurisdiction in the world to comply with such a tax. It would also be impossible to impose sanctions on those sovereign jurisdictions that refuse to do so.
Even if we could persuade all 26 OECD countries and all G-7 countries to impose a 1% or .5% levy on financial transactions, of which I am highly skeptical, we would still have some 130 international sovereign jurisdictions to persuade to participate in this kind of tax.
Inevitably some would do what banking havens like the Grand Caymans, Bermuda, Switzerland and the Channel Islands do today, that is act as havens for investment. We would find that capital would flow to the point of least resistance. We would end up with an enormous distortion in international financial markets which would be devastating to equity markets and the prosperity and economic prospects of countries like Canada.
With respect to my colleague from Regina, it is a nice idea but it is impractical. It would not work. It could not work. Let us not hamper Canada's economy by imposing such an unworkable international tax regime.