Financial Transactions Taxes: new task forces (+ Stiglitz)
"Although economist James Tobin said his idea of a small tax on every foreign exchange transaction, in order to reduce financial sector volatility, was unfeasible in practice, Professor Stiglitz said modern technology meant that was no longer the case.
Prof Stiglitz, in Istanbul for talks on the fringes of the International Monetary Fund and World Bank meetings, said the tax is “much more feasible today” than a few decades ago, when Tobin recanted.
Last week IMF managing director Dominique Strauss-Kahn said the Fund was now working on plans to create a tax or “insurance fund” into which financial services groups should pay to mitigate the effects of this and future crises. However, he said a simplistic Tobin tax was impossible for technical reasons."
and he added:
"He said that any new tax should be levied on all asset classes – not merely foreign exchange – and would be based on the gross value of the assets, thereby helping to discourage the creation of asset bubbles."
In this light, we now understand that a conference on Financial Transaction Taxes (FTTs) is now planned for October 22 in Paris, as the set-up point for a new task force on FTTs. The task force is expected to meet three or four times between now and June 2010, at ministerial or official level France's Foreign and Finance Ministers agree on the principle of a tax too (as do the Germans), and many others.
The discussions in Paris are currently envisaged on two main kinds of taxes: first, regulatory taxes (Tobin taxes, as advocated by Lord Turner), aimed at curbing "socially useless" (or, more accurately, harmful) speculative activity, of the order of 1%; and second, financial taxes, at much lower rates (e.g. 0.005%) aimed at financing development.
The task force is expected to take input from civil society, banks, and so on.
Credit to the French for pushing forwards on this. Watch this space.