Tobin tax

A Tobin tax refers to the suggested tax on all trade of currency across borders. This is supposed to put a penalty on short-term speculation in currencies. The proposed tax rate would be low, between 0.05 and 1.0 per cent.

Since one country acting alone would find it very difficult to implement this tax, many argue it would be best implemented by an international institution. It has been proposed that having the United Nations manage a Tobin tax would solve this problem and would give the U.N. a large source of funding independent from donations by participating states.

Some people believe that one reason the tax has not been more widely implemented is that it constrains globalization in ways which conflict with the pro-globalization goals of powerful economic institutions like the World Trade Organization and the World Bank. Others, however, believe that the Tobin tax would promote globalization by limiting its negative effects.

The name comes from the economist James Tobin. It was in 1972, soon after the Nixon administration pulled the United States out of the Bretton Woods system, that Tobin suggested a new system for international currency stability, and proposed that such a system include an international charge on foreign-exchange transactions. Professor Tobin later received a Nobel Prize (1981), and his name will evermore be fixed to this idea.

The idea lay dormant for more than 20 years. It was revived largely through the efforts of Canadian activists in the 1990s, and in March 1999 that country's House of Commons passed a resolution directing the government to "enact a tax on financial transactions in concert with the international community."

The Tobin-tax idea was the subject of much discussion in Europe in the summer of 2001. In that context, the "City Notebook" column in the Guardian (U.K.), Aug. 30, 2001 put the case against such a tax in straightforward terms. It said that currency speculators are “an exceptionally useful lot, working day-in, day-out, risking their own wealth to supply a thing called liquidity. Without liquidity, markets dry up, prices become volatile and goods become difficult to shift.” If a Tobin tax were in place, the editorial continued, that useful work would not be as well accomplished. “The net result is that everyone involved —producer, trader, buyer— becomes poorer, not richer” said The Guardian.

On 15th June 2004 the Commission of Finance and Budget in the Belgian Federal Parliament approved the bill implementing the Spahn version of the Tobin tax. According to it Belgium will introduce the Tobin tax if all countries of eurozone introduce the similar bill.

In the Americas, the Tobin tax has been supported by the president of Venezuela, Hugo Chávez, who recently announced that he is currently studying the implementation of such a tax.

See also

ATTAC (Association for the Taxation of financial Transactions for the Aid of Citizens) an organization that promotes the idea of a Tobin-type tax. Paul-Bernd Spahn Rodney Schmidt

External links

• ATTAC
• Tobin Tax Initiative
• War on Want
• coverage of the issue in HedgeWorld
• The Guardian editorializes against the Tobin tax