Thursday 27 August 2009
Tobin tax revisited?
An interesting proposal from the chair of the UK Financial Services Authority for a tax on financial transactions to combat excessive risk taking. The idea of such a tax was first mooted by American economist James Tobin in the 1970s, but never took off. Is the Tobin Tax an idea whose time has come? Comments?
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3 comments:
We should do everything in our power to strongly support this initiative in the UK. It would be a freakin' godsend for the Irish financial sector.
A Tobin Tax would have be applied globally. But every country would then be incentivised to break ranks and obtain the gains that would flow from all those banks relocating to them.
It's never going to happen.
In today's FT, Friday, Aug 28th, there is a stong argument in favour of "putting sand in teh wheels of the market" with such a tax. It is interesting that conservative paper slike the FT actually discuss such ideas, wehnt eh Irish media is so limited in both the scope of debate and the one sided ie Dublin Consensus view. Avinash Persuad ( a former banker and curent capitalist!) argues that such a tax is immensely practical and are already commonplace and practical to enforce.
Willem Buiter has a good article on the Tobin Tax in today's FT (but easier to get to on his blog http://blogs.ft.com/maverecon/)
His point is that the tax would not solve the problem of banks being too large (the better way of doing that is to remove the implicit subsidy to the sector from the state guarantee on the banks' unsecured debts) and that it could induce exchange rate instability.
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