For quite a few years this publication has been advocating the concept of a modest government levy on the transfer of funds to and from local financial institutions.

In the past, this has either fallen on deaf ears or provoked opposition from the financial services industry on the grounds that it would drive away business.

Nevertheless, some countries have already been alert to this means of raising revenue and have been contemplating the imposition of a charge based on a percentage of the transfer fee charged by the financial institution concerned. Anywhere between 10 and 50 percent has been mooted in this respect.

If such a levy was to be at the lower end of the scale, it could well be that the financial institutions would absorb such charges so that customers would not be affected at all.

We do not know the relevant volume of money transfers being made each year by banks and other financial institutions in the Cayman Islands but it must be substantial, and surely the Monetary Authority and/or the Statistics Unit would have such figures readily available so that a determination could easily be made as to what could be raised at various rates of such a levy.

Even if the government could raise ten percent of what is required to cover the budget deficit, at least it is a start in that direction. Indeed, there will be no “magic bullet” that will solve the country’s economic problems at a stoke so it will in any event doubtless be a process for the government of introducing a larger number of smaller measures that will together raise the necessary revenue.

In the meantime, Lord Turner, head of Britain’s Financial Services Authority (FSA), has had some interesting things to say about banks and the financial sector in general.

He asks what good are banks if all they do is push money around and enrich themselves? As he sees it, the financial industry takes too much from society and gives back too little. It has grown too big and too powerful. And, he contends, the bankers have co-opted many of the regulators who watch over them.

His agency, the FSA, has recommended to leaders of the G20 that banks use their new profits to strengthen their finances, rather than to pay out lavish bonuses or stock dividends.

Banks “need to be willing, like the regulator, to recognise that there are some profitable activities so unlikely to have a social benefit, direct or indirect, that they should voluntarily walk away from them,” he
said recently.

Lord Turner’s proposed tax, known as a “Tobin tax,” after James Tobin, PhD, a Nobel laureate economist at Yale, was, when originally proposed, limited to foreign currency transactions, which would allow national governments to stop their economies being at the mercy of speculators.

Although the tax proposed was minimal - 0.1 to 0.25 percent (or 10 to 25 cents per hundred dollars yielding 100 to 300 billion dollars annualy) – it would have deterred currency speculators, who tend to operate on such small margins that the tax would have made a significant difference.

This would therefore discourage short-term currency trades, which are about 90 percent speculative, but leave long-term productive investments intact.

Equally, trillions of dollars are booked annually though Cayman Islands licensed financial institutions and a miniscule percentage levy on such transactions that would hardly be noticed in the scheme of things would nevertheless amount to a significant contribution to our national budget.

As demonstrated in our latest online poll, although a majority (56.7 percent) currently opposes the concept of a new financial levy, a significant segment (40.9 percent) of local residents support the idea.

With every other idea for new or increased taxes apparently being rejected by the government, except possibly increased import duties, which will fall on rich and poor alike, we are still waiting for realistic proposals as to where the money is coming from to cover the projected budget deficit.

Whether the goose that laid the golden eggs for decades has now flown away is another matter, but at least the possibility of a “Tobin tax” should no longer be ignored.