Professor David Camroux, referring to a Robin Hood tax, seems to be just another applicant to the position of a Sheriff of Nottingham.

Sir, here is David Camroux, an Associate Professor of Science Po, quoting Jean Baptiste Colbert in that “the art of taxation” is taxing so that it is least noticed; writing that the FTT proposed by the European Commission could raise about €30bn to €35bn annually; and indicating it as an amount “rather small in comparison to the revenue needs of the 11 European Governments concerned”, and still he has the gall to refer to it as a Robin Hood tax, “FTT a feather in the cap for the average taxpayer”. May 30.

Sincerely as far as I am concerned Mr. Camroux is clearly only showing credentials to apply for the position of a Sheriff of Nottingham.

Perhaps one day we will find FTT as uncontroversial as VAT Camroux writes. Indeed, but was that to happen, that would just mean another regressive feather plucked from the goose average-taxpayer and put in an average European Commission bureaucrat cap.

If Professor Camroux really wants to help the average taxpayer, then what he should do is to question the revenue needs of their respective governments.

PS. There was a time that the FTT could have been a Robin Hood tax. That was when it was seen as an instrument to obtain resources from rich countries so as to help poor countries. But that was, at least, a financial crisis ago.

Why don´t Europeans agree first...they seem worlds apart!

Sir Peer SteinBrück, the German finance minister, in “A tax on trading to share the costs of the crisis”, September 25, proposes a tax on financial transactions of 0.05 percent that could “yield up to $690bn a year.

But, Bernard Kouchner, the French minister of foreign affairs in “A tax on finance to help the world´s poor” September 17, he spoke about a tax of 0.005 percent that would “raise €30bn”.

Why don’t the Europeans agree first among them what they want to propose to the world? Now, they seem worlds apart.

That said before any tax of this sort, the world´s poor, and most of the rest of the world, would benefit more from taking away that financial tax that the current capital regulations for banks represent in that, above of what the market already charges for risk differentials, it creates arbitrary costs, far from minuscule, that directly taxes those more prone to be considered as more risky, like the poor and the development countries. http://bit.ly/4yX7k1

Mr Bernard Kouchner, you better beguine by taking away the tax on the world’s poor.

Sir I do not believe that the markets´ capability to arbitrage away disequilibrium would be seriously compromised by a minuscule tax on financial transactions and so I do not oppose it, in fact I support it as “a time for a second thought tax” helpful for everyone. And of course I do not reject the idea of “A tax on finance to help the world´s poor” as argued by Bernard Kouchner, September 17.

That said let me be absolutely clear that the world´s poor, and most of the rest of the world, would benefit much more from taking away that financial tax that the current capital regulations for banks represent in that, above from what the market already charges for risk differentials, it creates arbitrary costs, far from minuscule, that directly taxes those more prone to be considered as more risky, like the poor and the development countries.

And so, Mr Bernard Kouchner, I would much prefer you forget your well-intentioned tax and instead eliminate your non-intentional tax.

Markets price risk solely in interest spreads which is why the regulators’ “risk weights” only brings confusion.

Sir with respect to Martin Wolf’s “Turner is asking the right questions” September 11, and who I see is now much closer to accept that this crisis was caused more by bad finances than by the abundant economic disequilibrium that existed and still exist, my very fundamental difference in opinion is the following.

Because the market prices risk solely through interest rates spreads, the interference of the regulators pricing it by means of “risk weights”, which lead to different capital requirements, creates much confusion in the risk allocation mechanisms; and we therefore need to eliminate all regulatory risk-discrimination. In other words, between a Tobin tax that can function as a speed bump and provide some “due diligence”, and capital requirements that “forcefully” channel funds into different risk territories I am all for the first and all against the latter.

As a consequence the credit rating agencies should revert to their traditional role as risk informers instead of being the risk decision makers the regulators turned them into.

Better putting some sand in the wheels than building channels that deviates the flow of capital.

Sir perhaps if there was a tax on responding an email during the first ten minutes of receiving it many unnecessary embarrassments could have been avoided. And that is primarily the role of a Tobin type like tax proposal, to slow things down, to give us a little more time, to put a lid on the trading of any small arbitrage opportunity becoming a purpose and not a tool. And, of course, in this I agree with Avinash Persaud’s “Time to put sand in the wheels of the market” August 28. Also, when you are allowed to put huge taxes on so many other goods and services, why should a minuscule tax of this nature be the source of much more dangerous inefficiencies?

But, having said that, let me point out the irony with so much being discussed about what a Tobin tax, with its little sands in the wheels of the market could do, compared to how little discussion, or none at all, there has been about the construction of the huge channel that the current capital requirements for banks made in Basel signifies, and that deviates trillions from what is perceived as risky to what is perceived as less risky. That is indeed a humongous tax, that is indeed a source of crazy structural inefficiencies, and that is what we are now paying for with the current financial crisis. Compared to that a Tobin tax is only a footnote

And then on top of it all there is the regulatory tax on risk.

Sir I could not be in more agreement with what Eric De Keuleneer has to say in his letter “Step up competition for banks and rating agencies”, May 12 in relation to taking away the powers the credit rating agencies have been given to distort the markets, as you must know having received at least 100 of my letters on the subject over the last years. That said Mr. De Keuleener does not mention the current tax that the minimum capital requirements for banks impose on risk.

Under the current Basel I Standardized Approach, a low risk corporate loan (rated AAA to AA-) requires a bank to hold only 20% of the basic 8% capital requirement, meaning 1.6 in units of capital, while a much riskier loan (rated below BB-) requires it to hold 150% of the basic 8%, meaning 12 units of capital. If the current cost of capital for the bank is 15%, then the bank's carrying cost for the low risk credit is 0.24% (8%*20%*15%) while the bank's carrying cost for the high risk credit is 1.80% (8%.150%*15%), thereby producing an additional cost of 1.56% that must be added on to the normal spread that the market already requires from the higher risk credit when compared to the lower risk one.

This mind-boggling 1.56 basis points regulatory tax on riskier but frequently more needed credits when compared to low risk but often not so productive loans, dwarves any Tobin tax proposals both in terms of costs and distorting signals, but it is blithely ignored.