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Tobin tax proposed by EuropeMore screams of outrage were emerging from financial institutions today as a Tobin tax was proposed by European leaders, hard on the heals of the bonus super-tax now being implemented by Britain and France. |
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Global transaction taxThe Tobin tax or global transaction tax is named after Nobel prize-winning economist James Tobin, who proposed a 1% tax on all foreign exchange transactions. The concept has now widened to include a broad range of financial transactions.With global daily turnover in foreign exchange markets alone worth an estimated €2,191bn, a Tobin tax set at only 0.005% would raise €20bn-€30bn a year. |
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Tax on 'socially useless activities'A recent UK treasury document, Risk, reward and responsibility, makes the case for a transaction tax:"One
argument for taxing certain transactions is that some financial
activities have little or even negative social value and therefore
ought to be taxed. This has been proposed by Paul Krugman as a tax on
speculators and Adair Turner as a tax on socially useless activities."
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Free market mantraUntil a few months ago the mantra within European capitals was that banks should be left to regulate themselves, the market should decide, government intervention should be kept to a minimum.Yet the banks refused to recapitalise and were determined to pay football star bonuses despite the public bailouts. So these proposals represent a sea change in political attitudes towards the financial sector. |
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Washington & IMF: cautiousMoves in Washington, on both a bonus super-tax and a Tobin tax, are more cautious compared to Europe, and the International Monetary Fund contains transaction tax critics.But the US public may become increasingly vociferous once the bonus season gets fully underway. It is estimated that Wall Street banks will pay $26 billion in bonuses for 2009 performance. 13 December 2009
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