Australia Institute call for tax to protect normal investors
INDEPENDENT Senator Jacquie Lambie will present a report from the Australia Institute to parliament today calling for a Tobin tax on financial transactions to help 'mum and dad investors'.
The tax aimed at reducing the ability of High Frequency Traders to affect market prices would reportedly protect superannuation investors and improve the operation of Australia's capital markets while raising government revenue of more that $1 billion annually.
Author of the report and Researcher at The Australia Institute Cameron Amos says "normal investors" are currently losing out to practices such as High Frequency Trading.
"High Frequency Trading creates instability which primarily hits retail - or 'mum and dad' investors, and super funds," he said.
"Australia's super funds and retail investors are losing up to $2 billion per year due to practices such as high-frequency trading."
High frequency trading sees predominately high-income investors profiting from super funds and retail investors by using powerful computers to trade large volumes of assets at very high speeds. The speed and size of their orders allows them buy up shares that normal investors have ordered and push up the price.
The report states it would take a tax of between 0.01 to 0.4 percent on all wholesale capital market secondary transactions to discourage excessive speculation and market manipulation.
"A micro-tax on transactions would reduce the ability of HFT traders to affect market prices and draw profit out of the market at the expense of super funds and longer term investors.' Mr Amos said.
Proposals for a Tobin tax have been rejected by successive Australian governments with some arguing that a Tobin tax could increase market volatility but Mr Amos says well-designed Tobin taxes have already been effective in other parts of the world.
"Australia wouldn't be the first to implement such a mechanism into the market, and we can learn from other countries. For example, the UK used a design which stopped 'investor flight' he said.
"The world is moving to stem the excessive growth in speculation, but Australia has its hands over its eyes."
The full report is available for download.