Financial Transactions Tax
SPEECH
Tuesday, 24 March 2015

Senator LAMBIE (Tasmania) (15:27): I move:

That the Senate take note of the answer given by the Minister for Finance (Senator Cormann) to a question
without notice asked by Senator Lambie today relating to a financial transactions tax.

Today I asked that the Liberal-National government introduce a new tax, a financial transactions tax, or an FTT,
for Australia. I want this financial transactions tax applied to specific companies which co-locate within our
stock exchanges and use supercomputers loaded with sophisticated software to make big profits. And I want the
revenue from a financial transactions tax to be linked to aged Australians’ pensions and to veterans’ pensions.
The companies which I am targeting with a financial transactions tax have acquired supercomputers and software
packages which enable the owners of companies to (1) identify and intercept share buy-and-sell orders; (2) highfrequency
trade and skim billions of dollars in profits. These companies, according to an Australia Institute
research paper, while having a huge technical advantage over retail or mum-and-dad investors, even have a big
technical advantage over large institutional investors. In short, if you (1) have the right IT hardware and software
and (2) are located close enough to the stock exchange, then you have a licence to print money while using
supercomputers to high-frequency share trade.

A financial transactions tax is a tax that all three major parties have run away from. Whatever the reason, the
bottom line is Australia is missing out on another source of income that most of Europe is now taking advantage
of. Our pensioners have been targeted by the Liberals for ‘budget savings’. We all know that is Abbott code for,
‘I’m going to steal money from you.’

In a forthcoming paper from the Australian Institute, which I will help officially launch this Thursday in
parliament, the writer says:

The European Commission have advocated for a 0.1 per cent tax on the transfer of shares, bonds and financial
instruments, and a 0.001 percent tax on derivatives. A European Union-wide special financial transactions tax
is set to be introduced on January 1, 2016. Both Italy and France are using revenue from the tax to pay down
national debt.

A financial transactions tax is not a new idea. Information I commissioned from the Parliamentary Library states:
The idea to introduce FTTs goes back to John Maynard Keynes in 1936. Writing during the Great Depression,
Keynes proposed a securities transaction tax to reduce destabilising speculation in equity markets. The idea
received renewed interest when economist James Tobin suggested in 1972 introducing a tax on international
foreign exchange transactions. Tobin saw the tax acting like soft capital controls by throwing ‘grains of sand in
the wheels of the market’ thereby enhancing the policy space for national fiscal and monetary policy.

And:
In August 2009, Lord Turner, chair of the UK Financial Services Authority, canvassed the possibility of imposing
a FTT on all financial transactions to promote an efficient financial sector, particularly more stable financial
markets.

A general FTT has come to be seen as a way of reducing financial market volatility and excessive speculation
in these markets as a safeguard against future financial crises.

As I explained in the lead-up to my question to the finance minister, the type of financial transactions tax I am
proposing is very simple, targeted and not as complicated as the tax systems proposed by John Maynard Keynes
and James Tobin.

The financial transactions tax I am proposing should only be levied on businesses in Australia which are colocated
in or near our stock exchanges, using supercomputers, complex IT software and high-frequency share
and stock trades. It would conservatively raise between $1 billion and $1.4 billion, while saving mum-and-dad
investors from $2 billion worth of profit skimming. My financial transactions tax would provide a new revenue
stream which could be tied to our aged pensions and veteran pensions. Who could possibly oppose it? Firstly, it
is a win for our mum-and-dad investors. Secondly, it is a win for our pensioners and veterans. Thirdly, it is a win
for our financial markets, which would be better protected from high-frequency share speculation and brought
into, as the Australia Institute says, ‘closer correlation with activity in the real economy’.

Question agreed to.

The Question …

THE SENATE
QUESTIONS WITHOUT NOTICE

Financial Transactions Tax
QUESTION
Tuesday, 24 March 2015

Questioner Lambie, Sen Jacqui Responder Cormann, Sen Mathias

Senator LAMBIE (Tasmania) (14:38): My question is to the minister representing the Treasurer, the finance
minister. I note that the Abbott government struggles to find budget savings which do not target Australia’s
aged pensioners, and that increasing the retired age to 70 or altering pension indexation rates in favour of the
government still has not been ruled out by the Treasurer. I also note that the Abbott government struggles to
ensure the banks and large financial corporations are made to pay their fair share of taxes and properly contribute
to the government revenue. Given that France, Italy and many other European countries have lessened the burden
on their ordinary taxpayers and created new revenue schemes by introducing financial transaction taxes, which
target banks and large financial corporations, apart from not wanting to upset people who donate generously to
the Liberal Party, can the minister explain why his government will not introduce targeted financial transaction
taxes in order to help repair the Australian budget?

Senator CORMANN (Western Australia—Minister for Finance) (14:39): I thank Senator Lambie for that
question. It is a fair question. What I put to Senator Lambie is this: our objective is to make sure that all of
the Australian government benefits and services are affordable and sustainable over the medium to long term—
indeed, forever. We want to ensure that the aged pension, disability pension, medical benefits, pharmaceutical
benefits—all of the important benefits and services provided by government—are sustainable and affordable in
the economy forever. The trajectory that we have been on as a country was taking us to 37 per cent government
spending as a share of the economy. The highest level of revenue as a share of the economy ever, in the history
of the Commonwealth, was 26.2 per cent, so there is a growing and rising gap.

Senator Lambie asked me: why don’t we just increase taxes? If we were to chase an unsustainable spending
growth trajectory, taking us to government spending of 37 per cent of a share of the economy with tax revenue
at that same level, we would kill the economy, we would make our economy uncompetitive internationally and
we would cause massive increases in unemployment. We would lessen opportunity and lessen living standards.
These are not easy and happy decisions for governments to have to make. But if you have to make a transition
to ensure that pension payments are sustainable and affordable in the economy, over the long term, then the best
thing you can do is to make sure that you take people through that adjustment in a gradual, incremental way to
ease the transition. And making adjustments to indexation arrangements—bearing in mind that CPI, right now,
is running above male total average weekly earnings as an index—is an incremental, gradual way to help people
through that transition to adjust to a more sustainable pension arrangement into the future. That is what we want
to do. On the other side, we have also got a proposal in the budget, of course—(Time expired)

Senator LAMBIE (Tasmania) (14:41): Mr President, I ask a supplementary question. I note that the minister
still prefers to target pensioners for tax increases rather than his mates in big business. Is the finance minister
aware of a particular type of financing trading company which is usually co-located in or near stock exchanges
that, by the use of super-computers and sophisticated software, are able to skim billions in profits from ordinary
retail investors? If so, would the minister agree that this sort of company using high-frequency trades would be
a good candidate for a financial transactions tax?
Senator CORMANN (Western Australia—Minister for Finance) (14:41): I thank Senator Lambie for that
supplementary question. The challenge, when it comes to proper tax policy and the best possible tax design, is
how can we raise the necessary revenue to fund the important services of government in the most efficient way
possible, in the least distorting way possible in the economy, so that we do not detract from economic growth and
job creation opportunities. So the conversation we need to have—bearing in mind that there is no opportunity
here to increase taxes with a ‘the sky is the limit’ approach—is—

The PRESIDENT: Pause the clock!

Senator Cameron: Mr President, I rise on a point of order on relevance. The question went clearly to a type
of company operating near the stock exchange that should be taxed. That was the question, and the answer has
not gone near that question.

The PRESIDENT: The question had an additional element than that, Senator Cameron, and the minister has 24
seconds in which to answer the question.

Senator CORMANN: The point I am making is that if we want to maximise economic growth and opportunities
for people to get ahead, we need taxes to be as low as possible—as high as necessary, but as low as possible—
to be as efficient as possible and to be the least distorting in the economy as possible. And we will be having
a tax white paper review process, which can consider any suggestions on how the tax system can be improved.
But I would not lock myself into any particular options at this point, because we have to go through a process.
(Time expired)

Senator LAMBIE (Tasmania) (14:43): Mr President, I ask a further supplementary question. I bring to the
attention of the minister a report from the Australia Institute, which claims that if a financial transactions tax were
only levied on a high-frequency share and stock traders who skim profits it would conservatively raise between $1
billion and $1.4 billion while saving mum-and-dad investors about $2 billion. If this is accurate, will the minister
give an undertaking to introduce this tax and dedicate its income to boosting our veterans and age pensions?

Senator CORMANN (Western Australia—Minister for Finance) (14:44): I am aware of the Australia Institute.
They are, indeed, an active participant in public policy debates across Australia. I am very confident that they
will be making a submission to our tax white paper review process when it is initiated very soon. But, again, I
would put a bit of a caution out there. Our objective ought to be to raise the necessary revenue for government—
as little as possible but as much as necessary—in the most efficient way possible, so we can continue to grow the
economy to its full potential, so we can continue to create better opportunities for people across Australia to get
ahead and so we can continue to ensure that future generations, our children and grandchildren, can have the best
possible opportunity to enjoy the same, if not better, living standards than those that are enjoyed by us today.
Senator Lambie: Mr President, I rise on a point of order. I simply asked the minister if he would give an
undertaking to introduce this tax. Would he at least look at it instead of just pushing me to the side. We are giving
you other options here. I am simply asking you—

The PRESIDENT: Order! Senator Lambie, you have raised your point of order. Minister, you have five seconds
in which to answer the question.

Senator CORMANN: I am not pushing anyone to the side, but I am also not going to lock the government into
a new tax. (Time expired)
Rob Messenger