The Feasibility of an International Tobin Tax

01-10-2000

In 1992 Nobel Prize-winning economist James Tobin suggested a tax on currency operations 'to throw some sand in the wheels of speculation'. Interest in the proposal has now been re-kindled as governments search for 'a new international financial architecture'. A Tobin Tax would penalise short-term speculation, while leaving long-term investment relatively unaffected. But there are doubts as to whether it could ever be put into effective practice. The tax has an additional attraction, however: it could raise very large sums for development, humanitarian aid, international peace-keeping and operations to stabilise world financial markets.

In 1992 Nobel Prize-winning economist James Tobin suggested a tax on currency operations 'to throw some sand in the wheels of speculation'. Interest in the proposal has now been re-kindled as governments search for 'a new international financial architecture'. A Tobin Tax would penalise short-term speculation, while leaving long-term investment relatively unaffected. But there are doubts as to whether it could ever be put into effective practice. The tax has an additional attraction, however: it could raise very large sums for development, humanitarian aid, international peace-keeping and operations to stabilise world financial markets.