Penny power

Someone wrote an amazing article on LDV a few weeks ago, proposing a kind of national transaction tax (I can’t recall the precise term he used) levied on every electronic payment made in the country. We must make millions of these across the nation every day for business and personal purposes. Moreover, at the infinitesimally low rate of 0.005% – is that a halfpenny on £100? the decimals baffle me – the product would finance a Universal Basic Income of something like £800 per person per month. OK, it’s not enough to live on, the argument goes, but even at twice or three times the rate, the impact of such a tax would be scarcely noticeable, so broad is its base, and the product quite realistic.

I may have misremembered the exact figures quoted, but the principle seemed sound to me. I’m amazed that it hasn’t been implemented already but, oh yes, we have a Conservative government! Something flashed across my mind the other day, however, putting two otherwise unconnected thoughts together, and I wondered whether something of that sort might not already be in operation, unbeknown to those contributing.

How many of us, like me, pay our domestic fuel bills by a regular direct debit, so that our monthly outgoings remain constant, evening out the winter peak in our consumption? If you do so, how much attention do you pay to the monthly charges themselves? So long as the total over the year is roughly in line with the sum of the monthly payments, I expect you’re satisfied for a year or two at least.

Leaning a little towards the obsessive, I log all my meter readings when I submit them and compare these to the bill that hits my inbox hours later. Once I’ve allowed for the VAT, which is peeled off the published tariff prices for calculation and added on at the end, the cost of day and night units is always spot on but, to make my calculations agree with the total bill, I have to add a penny – sometimes two – on to the standing charge. That’s perhaps 15p per year – infinitesimal.

Now, if the incremental change in my invoice number every month is an indication of how many customers this company has, it’s almost a million. Moreover, if the phenomenon I’ve described covers all of them, that’s £150,000 extra turnover without publishing any increase in charges at all! And it’s related purely to the customer base, taking no account of energy throughput, which offers a far greater potential!

Something like this, properly geared, harnessed and channelled in the right direction, could well finance the UBI we would all like to see!

* Brian has been a member since 2015 and is the secretary of Letchworth, Baldock and district branch in Hertfordshire. He describes himself as a 'sedentary activist'

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  • From what I’ve read it wouldn’t be a good idea. That said, when we are talking about tax we need to compare different models of taxation, you can’t just magic extra money out of thin air by being clever.

    Is a transaction tax a better way of raising tax than other forms of tax? What is tax for? What is a good tax? What is a bad tax? What is fair taxation? What is unfair taxation?

  • David Evershed 27th May '20 - 11:16am

    I foresee a role for an aggregator business to take one monthly payment from individuals and then make a bulk payment to utility and other companies for the amounts owed, thus avoiding most of the transaction tax. Smaller payments can be made in cash on the developing black market.

  • Laurence Cox 27th May '20 - 12:17pm


    The original article was:

    Incidentally the original Swiss figure was 0.2% (20p in £100), so a long way away from your halfpenny. The comments to that article illustrate that the approach is far from trouble-free. For example, if you were to start paying for purchases in cash, while your withdrawal from the bank would presumably be taxed, your cash payment to a trader would not be neither would his to his supplier and so on. As long as the cash was not paid into a bank it would go round and round without incurring any further tax. To make your system work you would have to ban the use of cash – a serious infringement of liberty.

    The Tobin tax should be reserved for its original purpose: financial transations by City traders. There is an argument that liquidity is over-rated; some liquidity is desirable and there have always been short-sellers, but the market does not obviously benefit from program trading.

  • I am afraid that this is a type of “magical thinking” that is often seen.

    All tax is tax, and all taxes are eventually borne by people. There can be good reasons for one tax rather than another (replacing some income tax by a carbon tax for example), but choosing between types of taxes makes no difference to the overall tax burden.

    If you want to introduce UBI (and I think the idea merits serious exploration, albeit at much lower levels than some advocates expect) financed by extra taxation, that is a perfectly fair proposition. However the case is not made any stronger by implying that Tax A is somehow a lesser burden on the economy than Tax B.

    Tax A may indeed be a better choice because of its ease of collection, impact on motivation to work, reduction of pollution etc. However what I didn’t like about the article was its implication that we can just magic £’ many billions of tax painlessly by introducing the proposed transaction tax. Paying such a tax is no less painful than paying more VAT.

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