Tobin Tax

### From Wikipedia, the free encyclopedia. A **Tobin tax** refers to the suggested [tax](/wiki/Tax "Tax") on all [trade](/wiki/Trade "Trade") of [currency](/wiki/Currency "Currency") across borders. This is supposed to put a penalty onshort-term [speculation](/wiki/Speculation "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 byan international institution. It has been proposed that having the [UnitedNations](/wiki/United_Nations "United Nations") manage a Tobin tax would solve this problem and would give the U. N. a large source of funding independent fromdonations by participating states. Some people believe that one reason the tax has not been more widely implemented is that it constrains [globalization](/wiki/Globalization "Globalization") in ways which conflict with the pro-globalization goals of powerfuleconomic institutions like the [World TradeOrganization](/wiki/World_Trade_Organization "World Trade Organization") and the [World Bank](/wiki/World_Bank "World Bank"). Others, however, believe that the Tobintax would promote globalization by limiting its negative effects. The name comes from the economist [James Tobin](/wiki/James_Tobin "James Tobin"). It was in 1972, soon afterthe Nixon administration pulled the United States out of the Bretton Woods system, that Tobin suggested a new system forinternational currency stability, and proposed that such a system include an international charge on foreign-exchangetransactions. 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 financialtransactions 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 currencyspeculators are “an exceptionally useful lot, working day-in, day-out, risking their own wealth to supply a thing calledliquidity. Without liquidity, markets dry up, prices become volatile and goods become difficult to shift.