Robin Hood Tax: a new legend in the making?

In an open letter to UK Prime Minster Gordon Brown, almost 50 groups, including charities such as Oxfam, Comic Relief and Save the Children, and unions such as the TUC, have rallied together to demand a "Robin Hood" tax on UK banks.

According to the campaign website, the Robin Hood Tax would see a tiny tax placed on bankers that would have the power to raise hundreds of billions of pounds every year. This money could then be used to give vital boosts to NHS funding, to schooling budgets and to help fight the good fight against global issues such as poverty and climate change.

And the tax really is tiny: experts say that 50p levy on every GBP£1000 traded by big money institutions (that's a 0.05 percent tax), could raise as much as GBP£250 billion a year to help Britain and the rest of the world get back on its feet in the wake of a global recession.

In short, then, the plan is to tax all bank transactions not involving members of the public by approximately 0.05 percent and use the resulting revenue "to tackle poverty and climate change."

Speaking out in support of a tax on financial transactions already are government officials such as UK Premier Gordon Brown, German Chancellor Angela Merkel and French President Nicolas Sarkozy.

And the politicos are reportedly joined by some hefty business bigwigs too, including the likes of Lord Turner from the FSA and US investor extraordinaire Warren Buffett.

In fact, the Robin Hood Tax campaign website boasts that this "isn't some crazy pipedream," instead insisting that it [the campaign] is a "simple and brilliant idea which transcends party politics and which can become a reality."

And according to the letter sent to PM Gordon Brown today, campaigners believe this "unique, popular tax" will guarantee that the banks, who played such a large role in causing the economic crisis in the first place, do more than just pay back the bailouts and insure against future crises. They write: "It is time for a new, practical contract with banks to improve the society they serve. We are confident the Robin Hood tax is based on sound economic ­foundations."

What's more, the campaign, which was officially launched today, has been bolstered by a massive online promotional film written by acclaimed-screenwriter Richard Curtis, the writer of films such as Four Weddings and a Funeral and Love Actually, and featuring long-time Curtis compatriot Bill Nighy.

The film runs with the tagline "it sounds complicated, but it isn't", and helps to define exactly what the proposed tax would mean.

Several issues

Of course, this isn't the first time this proposal has been bandied about. Previously it was known as the Tobin Tax - before that the financial transaction tax. And the fact that neither of those proposals ever made it to fruition is just one of myriad issues facing the reality of the Robin Hood Tax.

Analysts are already discussing the very real possibility that the actual cost of collecting a 0.05 percent tax would be greater than the amount of revenue it raises, not to mention the debate over who would actually decide how the raised capital gets spent.

On top of that is the stalemate theory, which proposes that if a country were to introduce such a tax, its own banking sector would be put at a competitive disadvantage. In other words, if, for instance, Britain introduced a Robin Hood Tax, the international banks that are headquartered in the City would simply relocate to a country in which their transactions aren't taxed. The theory basically states that: unless countries adopt the tax unanimously, no country will adopt it at all.

So while the Robin Hood Tax might seem like a simple and brilliant idea, the reality of it seems far more lucid, far more complicated and - ultimately - insatiably more "pipedreamy."

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