Tuesday, February 09, 2010

The Robin Hood Tax: an all-round winner

Today sees the launch of a new campaign calling for a Robin Hood Tax on financial transactions. TJN strongly supports the principle of this tax, especially when applied to currency transactions.

The idea of taxing financial transactions is not new. American economist James Tobin (pictured) mooted the proposal back in 1971, largely in the context of seeking ways to protect currencies - not least Sterling - from speculative attack by traders. Famously, Tobin described the proposal as a means of putting "grains of sand in the wheels" of international finance.

Sadly, at the time his ideas were supplanted by the defeatist ideology of those who argued that governments "can't buck the markets", paving the way for the largely de-regulated, free-for-all situation that has prevailed since that time. The disastrous consequences of this failure to shape markets to serve the public are now clear to even the most myopic.

But the idea of a Tobin Tax was revived and refined in the late 1990s in response to the frightening social and economic impacts of the financial crisis in south-east Asia, which rapidly spread to Russia and on to Latin America. Sadly, complacency amongst OECD countries meant that little was done at that time, but civil society has stayed with the idea, making transaction taxes a core demand of the coalitions that have formed around the World Social Forum, including Tax Justice Network.

The time has come for governments to adopt Tobin's idea, preferably in the form suggested by Paul Bernd Spahn, who has proposed a two-tier system which applies a normal rate at a very low level, backed by a surcharge rate which could be deployed during periods of speculative attack. This proposal has the merit of not impairing international market liquidity, but puts in place a mechanism that deploys automatically to stabilise market volatility. It might also raise significant additional revenue in a wholly equitable fashion, and without the need for a complex collection machinery.

In other words, an all-round winner.


Anonymous Helen said...

I couldn't have dreamed up a better actor for a better campaign.

Thank you to everyone involved.

4:01 am  

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