The idea of taxing financial transactions has been gaining strength since 2008, when the world began to suffer one of the worst economic crises in recent history. The movement involves a revival of the so-called “Tobin Tax,” a concept that takes its name from U.S. economist James Tobin, who suggested the creation of a tax on financial transactions in 1971. The original notion held by the 1981 Nobel Prize-winner in economics was to tax foreign exchange operations to stop movements from one currency into another in order to discourage the flow of capital towards very short-term transactions; that is to say, to penalize speculation in order to give more stability to the currency exchange system. The tax had to be low -- about 0.1% of the value of each transaction -- in order to penalize only very short-term, purely speculative transactions, rather than penalize longer-term investments. The explanation was that the real return from each speculative transaction is very low, and that speculators will only get a good return from such transactions when they do them in large volumes and at great speed.
The original concept was rejected and it was never implemented. Even Tobin himself said that he had been misinterpreted. However, the Tobin Tax has returned to newspaper headlines recently. Its defenders see it as a way to curb and control market speculation which, they argue, is one of the causes of the current economic recession. Anti-globalization movements believe that the proceeds from this tax can be used for curbing poverty in the world. However, its detractors view the tax as an interventionist measure that hinders free trade.
From Idea to Action
Recently, France has moved beyond mere words to action, becoming the first country to implement the Tobin Tax.
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