Tobin tax Concepts

Basic Income: A Radical Proposal for a Free Society and a Sane Economy

by Philippe van Parijs and Yannick Vanderborght · 20 Mar 2017

discontinued.46 Instead of relying on the creation of money, one could also think of funding basic income by taxing the circulation of money. The “Tobin tax” on international financial transactions can be viewed as a relatively modest version of such a tax and has also occasionally been proposed as a source

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financial markets by discouraging speculative transactions. Even very low tax rates would generate a sharp contraction of the tax base. Hence, the yield of a Tobin tax is bound to remain modest. Moreover, for obvious reasons, it can only be introduced at an international level.48 However, one could also think of

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a “super-Â�Tobin tax,” a micro-Â�tax on Â�every single electronic money transfer, even from one’s own current account to one’s savings account. In the

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a fluctuating top-up. Another tempting option is the financial transaction tax, also known as the Tobin tax. On the basis of 2012 estimates for the EuÂ�roÂ�pean Union, a yield-Â�maximizing, EU-Â�wide Tobin tax could, Â�under fairly optimistic assumptions, fund a basic income of no more than 10

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financial transactions. The Association pour la taxation des transactions financières et pour l’action citoyenne (ATTAC), founded in Paris 1998 with the introduction of a Tobin Tax as its main aim, soon started discussing and advocating other ideas. Its German branch, in parÂ�ticÂ�uÂ�lar, became actively involved in the discussion

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for a eurodividend and mention an estimate of 10 euros per month as the maximum level of basic income that could be funded by a Tobin tax introduced at EU level. 49. The most prominent advocate of this micro-Â�tax, in the Swiss context, was socialist politician Oswald Sigg, former vice

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to, 205, 312n129 Tinbergen, Jan, 8, 191 Tobin, James, 29, 39, 45, 87, 89, 91, 154, 196, 213, 261n22, 262nn24,25, 275n76, 276n84, 314n154, 319n33 Tobin tax, 153–154, 237, 294n47 Tocqueville, Alexis de, 59–60, 266n36 Townsend, Francis Everett, 159 Townsend, Peter, 24 Trade Â�unions. See Â�Labor Unions Training

Irrational Exuberance: With a New Preface by the Author

by Robert J. Shiller · 15 Feb 2000 · 319pp · 106,772 words

in the Wheels of International Finance,” Economic Journal, 105 (1995): 162–72. Mahbub ul Haq, Inge Kaul, and Isabelle Grunberg have edited a volume (The Tobin Tax: Coping with Financial Volatility [New York: Oxford University Press, 1996]) of papers commenting on the Tobin proposal. 23. Lawrence H. Summers and Victoria P. Summers

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. 24. See Jeffrey Frankel, On Exchange Rates (Cambridge, Mass.: MIT Press, 1993) and “How Well Do Foreign Exchange Markets Work: Might a Tobin Tax Help?” in ul Haq et al., The Tobin Tax, pp. 41–81. 25. See Shiller, “Measuring Bubble Expectations.” 26. See Richard Roll, “Price Volatility, International Market Links, and Their Implication

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. Frankel, Jeffrey. On Exchange Rates. Cambridge, Mass.: MIT Press, 1993. ———. “How Well Do Foreign Exchange Markets Work: Might a Tobin Tax Help?” in Mahbub ul Haq, Inge Kaul, and Isabelle Grunberg (eds.), The Tobin Tax: Coping with Financial Volatility. New York: Oxford University Press, 1996, pp. 41–81. French, Kenneth R., and Richard Roll

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, Amos, and Daniel Kahneman. “Judgment under Uncertainty: Heuristics and Biases.” Science, 185 (1974): 1124–31. Ul Haq, Mahbub, Inge Kaul, and Isabelle Grunberg (eds.). The Tobin Tax: Coping with Financial Volatility. New York: Oxford University Press, 1996. VanDerhei, Jack, Russell Galer, Carol Quick, and John Rea. “401(k) Plan Asset Allocation, Account

In Defense of Global Capitalism

by Johan Norberg · 1 Jan 2001 · 233pp · 75,712 words

for corruption, and different people are treated differently by the law. Tobin tax One proposed capital regulation that has achieved popularity in recent years is the so-called Tobin tax, named after Nobel laureate economist James Tobin, who first suggested it. The Tobin tax is a low tax of 0.05–0.25 percent on all

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capital to cross currency exchange boundaries. It’s argued that in this way harmful speculation and major exchange crises could be avoided. Criticism of the Tobin tax has focused on the impossibility of introducing it. In practice, all countries would have to agree on it; otherwise transactions would go through nonsignatory countries

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avoid transaction costs. Perhaps nearly the entire world economy would end up using U.S. dollars. But there is a more serious objection to the Tobin tax: even if it were possible to introduce, it would be harmful. This tax would actually be more harmful to the financial market than regulations by

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individual countries. The only effect of the latter is to reduce inflow in the country opting for them, whereas a Tobin tax would reduce turnover and the possibility of external financing all over the world, even for countries in great need of such financing. Obstacles to the

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movement of capital fence it in where it is already—in the affluent countries—and the Third World is the loser. The Tobin tax, therefore, is not really a tax on capital but a tariff that makes trade and investment more expensive. Advocates of the

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Tobin tax claim that it need not have this effect, because it is so low. For long-term investments the cost will be negligible. But the problem

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to other parts of the operation, add capital, buy components from abroad, and so on. With every little transaction taxed, the total cost of the Tobin tax will be many times greater than the low cost suggested by the percentage figure on paper, and so doing business in one’s own currency

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access to capital and, consequently, fewer investments. Interest rates will rise, and borrowers will have to pay more for their loans. The adherents of the Tobin tax say that what they really want to get at is sheer currency speculation, not productive investment. But the idea that there is some hard and

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, for example, purchase the right to sell the currency it will be receiving at a predetermined price. But it is this very ‘‘speculation’’ that a Tobin tax would prevent. And, just like an ordinary investment, it involves more than one single transaction. If a speculator took over only complete risks, he would

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way the secondhand market for shares, the stock market, gives people the courage to finance new businesses by participating as shareholders. The structure of the Tobin tax is aimed at this very market. It would result in fewer speculators being ready to take on risks and in their demanding much more payment

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market. During the past decade, the developing countries have received over a quarter of all foreign direct investment. This figure would fall dramatically if a Tobin tax were introduced. It would be more difficult for people and businesses in poor countries to obtain loans, and they would be forced to pay higher

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rates of interest. There is a serious risk, then, that financial markets would be disrupted by a Tobin tax. But that tax would not be capable of preventing exchange crises. In practice, the tax would establish only a low barrier to impede everyday trading

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individual players and transactions decisively affecting prices. In this way free exchange markets prevent the occurrence of violent exchange rate fluctuations, something that, paradoxically, the Tobin tax could augment by reducing the liquidity of the exchange market. Constant equalizations and adjustments would be replaced by big periodic jolts. Currency, market shocks, and

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is that countries with severe capital regulations have far more erratic exchange rates than those with fewer restrictions.7 But for all these shortcomings, the Tobin tax still has one advantage: it would yield tremendous revenues. The ATTAC movement counts on $100 billion a year—some say $10 billion to $50 billion

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world government from swerving into an orgy of corruption? Who would prevent abuses of its expansive power? And who would get the money? Nevertheless, the Tobin tax would in theory mean several billion dollars that, for example, could be used to help the Third World. But if we are convinced that a

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listeners. This task is an important one, but such reforms demand long-term work of a decidedly unglamorous nature. Shouting for capital controls and a Tobin tax, while misguided, can appear easier and more exciting than the arduous process of institution building. The one rational, quick-fix reform that could be implemented

The Globalization Paradox: Democracy and the Future of the World Economy

by Dani Rodrik · 23 Dec 2010 · 356pp · 103,944 words

throw some sand in the wheels of our excessively efficient international money markets.”26 His specific recommendation was a tax on international currency transactions, a “Tobin tax,” as it has come to be called. Tobin was in a distinct minority, however, and his plea fell on deaf ears against the background of

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. The French and Germans, joined this time by the British, have pushed for a global tax on cross-border financial transactions (a variant of the Tobin tax we saw earlier), only to be rebuffed by the American administration. Finally, Europeans have taken a much harder line on bankers’ bonuses than Americans. On

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–59. 27 Lord Turner, chairman of the U.K. Financial Services Authority, raised an outcry in August 2009 when he expressed support for a global Tobin tax. This was the first time that a major policy maker from the United States or Britain, the two leading centers of global finance, has come

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-Streets- Boom?print=true#). 10 James Tobin, “A Proposal for International Monetary Reform,” Eastern Economic Journal, 4 (July–October 1978), pp. 153–59. 11 The Tobin tax rate that is contemplated usually lies in the vicinity of 0.10 to 0.25 percent. Consider, e.g., a tax of 0.10 percent

What's Next?: Unconventional Wisdom on the Future of the World Economy

by David Hale and Lyric Hughes Hale · 23 May 2011 · 397pp · 112,034 words

and Anna Matysek vii. crisis and reform 17 Were Banks Bust in 2009? And Did They Really Need Much More Capital? Tim Congdon 18 The Tobin Tax: Creating a Global Fiscal System to Fund Global Public Goods Andrew Sheng 19 Fiscal Imbalances, Economic Growth, and Tax Policy: Plucking More Feathers from the

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issue of climate change. The seventh part focuses on a variety of policy issues, including financial regulation, taxation, corporate compliance, and the prospects of a Tobin tax to finance global public goods. The final section focuses on investment decision-making and the diminishing returns from information technology. In the first chapter I

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impede the recovery of the global economy and set the stage for more capital erosion through loan losses. Andrew Sheng offers the case for a Tobin tax to finance global public goods. He reviews the origin of the idea in the 1970s and the recent proposal of it by Lord Adair Turner

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the world is caught in a collective action trap that encourages a race to the bottom for financial regulation and taxation. He believes that a Tobin tax offers many advantages, including money to finance global public goods, increased data availability on financial transactions, and a tax on bank profits to reduce the

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Reform Package” (press release, Basel, Switzerland, July 26, 2010), http://www.bis.org/press/p100726.htm. 18 THE TOBIN TAX: CREATING A GLOBAL FISCAL SYSTEM TO FUND GLOBAL PUBLIC GOODS Andrew Sheng The Tobin Tax: Sand in the Wheels of Speculation In the early 1970s, when the US dollar abandoned convertibility against gold and

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, the proposed tax was never adopted or considered seriously in official circles. Most economists, international banks, and governments do not like the idea of the Tobin tax proposal because they feel that it would be difficult to implement and may even add instability to foreign exchange markets. The Recent Financial Crises Have

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Renewed Interest in the Tax When currency speculation became controversial again during the 1997–1999 Asian financial crisis, the idea of a Tobin tax was revived as part of the antiglobalization movement. Again, the idea was deemed by the official Group of Eight (G-8) circles as not worth

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the tax, and it retained minority support in Europe and the United Kingdom. The 2007–2009 global financial crisis also brought renewed attention to the Tobin tax idea. In November 2010, the European Commission announced that it supported a financial transactions tax (FTT) at the global level, but a financial activity tax

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forum. Among emerging markets, Brazil, Venezuela, and Argentina have also displayed support for some form of a Tobin tax. Support for the Tax Is Found in an Unlikely Location Strangely enough, the idea of the Tobin tax seems to have resonance in the United Kingdom. First among its supporters are charities that are interested

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out strongly against this idea. Critics of the tax contend that currency speculation is useful for liquid markets, price discovery, and risk management. Hence, a Tobin tax would constrain currency speculation and hurt global market liquidity. Unfortunately, the global financial crisis has shattered conventional wisdom about global governance. Bank of England Governor

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-based taxes, 261–263; corporate taxes, 260; energy taxes, 260; excise taxes, 262; income taxes, 6, 260–262; payroll taxes, 261–262; sales taxes, 262; Tobin tax, xxvii, 250–255; turnover tax, 253–255; value-added tax (VAT), xxviii, 6, 43, 262 tax policy, xxvii–xxviii; Canada, 20, 26; Mexico, xix, 42

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and, 181–183 telecoms, 26 television, 298 Term Asset-Backed Securities Loan Facility (TALF), 277 testosterone, 290 Thailand, 7 Thaler, Richard, 291 Tobin, James, 250 Tobin tax, xxvii, 250–255 “too-big-too-fail” bailouts, 266, 267, 268 total factor productivity (TFP), 87 toxic securities, 238–239 transparency, 280–282 Trichet, Jean

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of, xxvi; domestic demand in, 140; as financial capital, 244–245; fiscal deficit in, 257; fiscal policy of, 59, 71; government debt in, 160–161; Tobin tax and, 251–252 United Nations Development Programme (UNDP), 184 United Nations Framework Convention on Climate Change (UNFCCC), 220–222 United States: banking sector in, xxvii

Hunger: The Oldest Problem

by Martin Caparros · 14 Jan 2020 · 684pp · 212,486 words

. Everybody deplores hunger, but in the discussion about what to do to fight it, one begins to see the insurmountable differences. Let’s introduce the Tobin Tax on financial transactions; open up more markets; forbid speculation on food; send experts to explain how to plant a particular seed; collect bags of food

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others the bare minimum needed for survival, would we be satisfied? There would be ways of achieving this. Let’s take, for example, the Tobin tax. The Tobin Tax is an old invention. In 1971 James Tobin, a Princeton economist, proposed a minimum tax—about 0.1 percent—on financial transactions as a way

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Monetary Fund.2 But the campaigns continued. Now, with the increase in speculative transactions—with the millions of transactions that computers now carry out—the Tobin tax would collect a fortune. There are other possibilities. In 2013, 310 million personal computers, 250 million tablets, and 970 million smart phones were sold: about

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be several thousand extra. To begin with, such proposals are illusory. When they say that the Tobin tax, for example, properly applied and well administered, could end world hunger, they don’t say that the Tobin tax—or any other similar tax—could not be levied because no political power exists that would be

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United States.” The Brookings Institute. April 16, 2018. FINAL THOUGHTS 1 “What Causes Hunger?” The World Food Programme. November 5, 2013. 2 Sandbu, Martin. “The Tobin Tax Explained.” Financial Times. September 28, 2011. 3 Pearce, Fred. The Land Grabbers: The New Fight Over Who Owns the Earth. Boston: Beacon Press, 2012, p

Profiting Without Producing: How Finance Exploits Us All

by Costas Lapavitsas · 14 Aug 2013 · 554pp · 158,687 words

for economic policy. An important regulatory step in confronting financialization, therefore, could be to impose a tax on financial transactions, widely known as a ‘Tobin tax’.42 Tobin taxes were originally conceived as currency transactions taxes. However, they could be considered more broadly as taxes on financial transactions in general with the aim of

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financial markets could be reduced as could the ceaseless invention of new ways to transact in loanable capital by banks and other financial institutions. Effective Tobin taxes would probably require international coordination among states, though there is scope in practice for introduction at a national or regional level. If public property and

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control were widely re-established in the sphere of finance, the introduction of Tobin taxes would probably become easier. Public banks operating in a spirit of public service would more easily refrain from regulatory arbitrage and would more naturally accept

High-Frequency Trading

by David Easley, Marcos López de Prado and Maureen O'Hara · 28 Sep 2013

50% or more transactions involving HFT. While debates rage over regulatory control, there is little consensus as to what is desirable, or even feasible. National Tobin taxes are doomed to fail, and an international agreement is unlikely. It is not even clear that these measures would do any good, other than change

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HF traders is constrained by the available LFT flows. Rather than seeking “endangered species” status for LF traders (by virtue of legislative action like a Tobin tax or speed limit), it seems more efficient and less intrusive to starve some HF traders by making LF traders smarter. Carrier pigeons or dedicated fibre

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cap the number of orders that highfrequency traders can submit or charge them additional costs. The most extreme form of regulation is the so-called Tobin Tax, a small fee on transactions of financial securities. France is the first European country to impose such a transaction tax, which amounts to 0.2

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%, to be paid on all transactions by companies headquartered in France. Becchetti et al (2013) analysed the impact of the introduction of the French Tobin tax on volume, liquidity and volatility of affected stocks and documented that the tax has a significant impact in terms of reduction in transaction volumes and

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the market volatility, while not affecting the overall volume (this effect on volume is likely to occur with a brute-force mechanism such as a Tobin tax). Therefore, spread/price–time priority ranking provides benefits to both short- and long-term traders: high-frequency traders would keep their source of revenue from

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an ongoing basis. The simulations indicate that price quality improves significantly, without the dramatic impact on volume that might well occur with the introduction of Tobin tax. There remain many open questions in the detailed mechanics of how price shocks are propagated. Researchers need access to comprehensive data sets so that they

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Settlements, 2011, “High-Frequency Trading in the Foreign Exchange Market”, Report, September. Becchetti, L., M. Ferrari and U. Trenta, 2013, “The Impact of the French Tobin Tax”, CEIS Research Paper 266, March. Bartolozzi, M., 2010, “A Multi Agent Model for the Limit Order Book Dynamics”, The European Physical Journal B 78(2

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“Easley” — 2013/10/8 — 11:31 — page 236 — #256 i i HIGH-FREQUENCY TRADING T time, meaning of, and high-frequency trading, 5–7, 7 Tobin tax, 17, 81, 87 Tradeworx, 215 trading algorithms, 69–72 and algorithmic decision-making, 71–2 and algorithmic execution, 70–1 evolution of, 22–8 generations

Big Three in Economics: Adam Smith, Karl Marx, and John Maynard Keynes

by Mark Skousen · 22 Dec 2006 · 330pp · 77,729 words

" on all securities sales as a way to dampen speculative fever.11 11. Nobel laureate James Tobin has entertained a similar measure, known as the Tobin tax on stock and foreign exchange transactions, a legal step that would surely reduce liquidity and enlarge the bid-ask spreads on stocks and foreign exchange

Global Governance and Financial Crises

by Meghnad Desai and Yahia Said · 12 Nov 2003

the deposit – this made it into a ‘Tobin-type’ tax, as it was equivalent to a fixed cost for certain types of external borrowing. By Tobin tax standards, however, this tax was very high (about 3 per cent for one-year inflows during booms in the capital market),38 and tended to

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. Of course, this phenomenon is not independent from the level that these price controls actually reached (which, as mentioned earlier, although high for a standard Tobin-tax level, were lower than those of Colombia, and, in practice, much milder than Malaysia’s controls in 1994); unfortunately, there is no sufficient data from

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, L. 15–16 technology stocks 25 Tequila effect 120, 143 terms of trade 55 Thailand 84–5, 101, 110–11, 114, 117, 130, 133, 139 Tobin tax 140–1 Triffin, R. 46, 53 uncertainty, financial 28 United Kingdom 52 United States 13, 29, 31, 35, 48; Congress 64–5; Treasury 43, 56