The Tobin Tax :An international tax on foreign currency transfers

A Tobin tax is the suggested tax on all trade of currency across borders. Named after the economist James Tobin, the tax is intended to put a penalty on short-term speculation in currencies. The original tax rate he proposed was 1%, which was subsequently lowered to between 0.1% and 0.25%.

Tobin Taxes are excise taxes on cross-border currency transactions. They can be enacted by national legislatures, followed by multilateral cooperation for effective enforcement. The revenue should go to global priorities: basic environmental and human needs. Such taxes will help tame currency market volatility and restore national economic sovereignty.

Opinions are divided between anti-globalizationists who applaud that the Tobin tax could protect countries from spillovers of financial crises, and pro-globalizationists who stress that the tax would also constrain globalization and dry up world liquidity.

A tax to curb speculation in foreign currency exchange is an innovative and fair proposal that will contribute to restoring democratic control over national economies. We should continue to pressure our government and the UN, IMF and World Bank to take steps to implement this measure as soon as possible. The tax should be administered by an accountable democratic structure such as could be found within the UN system, with the revenue collected used for genuine social development.

Unexpected, though qualified, support for the Tobin tax has come from the multi-billionaire speculator George Soros, who stated that, while the tax goes against his personal interests, he thinks that its introduction could have positive effects on the world economy. However, he advocates a variation to the Tobin tax: Special Drawing Rights or SDRs that the rich countries would pledge for the purpose of providing international assistance