Banking transaction tax is a dangerous idea

The idea of taxing every bank transaction has recently gained ground in India as it has been advocated by both political and religious leaders. This idea gained traction in recent years after European Union countries suffering from an economic crisis proposed a global transaction tax with the hope that such taxes from India and China would bail out the European economies. The United Nations has supported the imposition of such taxes.

Statements of support have also been released by the Vatican both under the current Pope and the previous Pope. Now, Indian politicians and religious leaders, without realizing that they are under the influence of global financial institutions, have started talking about imposing a transaction tax on Indian citizens. This concept is detrimental to Indian society as it is intended to drive a stake through the heart of the economic ethos of India which is based on savings and financial stability.

Transaction taxes are closely tied to the concept of a cashless society and both these ideas are usually mentioned in the same breath. In a cashless society, it is proposed that no one will use any money and that everybody’s wealth will be in the control of banks which will work as tax collectors for governments.

American bureaucrat Larry Summers who has served the World Bank and the American government in various capacities recently gave away the real intent behind a cashless society when he stated that a cashless society would prevent people seeking shelter from inflation and negative interest rates.  

Negative interest rates is another way of saying that the government will confiscate wealth from bank deposits. Bank deposits would constantly diminish in value as the government gets banks to take away a share of one’s hard earned money. Summers used the disparaging word ‘hoarding’ to refer to savings. The statement by Summers illustrates the fact that inflation in an economy is not the effect of uncontrollable forces but is by the design of those in power.

Summers also added that he advocated inflation and negative interest rates so that people are forced to spend their savings thus transforming societies into consumption-based economies. These actions will not only penalize those who have saved money but will also have a destabilising effect on society. A banking transaction tax within India is merely the first step towards a global banking transaction tax. Such a tax in individual countries is sure to be followed by an international agreement to regulate such taxes, effectively creating a global cashless regime in which India will yet again be treated as a second-class member. Taxes from India will be used to fund American corporations and European bureaucrats.

Money cannot be replaced by numbers stored in bank accounts without giving up on the definition of money. One of the prime characteristics of money is that it should be durable and should not deplete in value. Today, people seek shelter in real estate and gold when irresponsible governments increase the  supply of paper based currencies. In a cashless society, people will become utterly helpless as they watch themselves and their family members reduced to misery.

Proponents of the transaction tax have appealed to emotions by framing the arguments as a fight against black money. They hide the fact that the banking transaction tax is merely the first step in the creation of a global taxation regime combined with a cashless society. Their arguments must be rejected as their system combined with restrictions on gold and a ban on other forms of trade, including barter, would usher in totalitarian rule.

The author is an expert on technology and economic issues. Views expressed are personal.