On August 1st, France introduced its long-promised Financial Transactions Tax (FTT). Popularly referred to as a Robin Hood Tax, or Tobin Tax, the 0.2 per cent levy will apply to sales of publicly traded shares, including credit default swaps, of businesses with a market value of over €1-billion. Ten other European countries, include Germany, Italy and Spain, are expected to follow the French lead.
Such a tax was first proposed in 1972 by Nobel Laureate economist James Tobin. His intention was to reduce speculation in the international currency markets which he saw
as dangerous and unproductive. He suggested using the proceeds of the
tax to fund projects for the benefit of Third World countries, or to
support the United Nations. The tax in effect provides a way of allowing governments, i.e. citizens, to reclaim
part of the democratic space that global trade agreements have conceded
to markets. Primarily designed to curb excessive market speculation, some of the revenue from the French tax will be used to support the global fight against AIDS.
The tax has strong support in Europe with 88 per cent of the French and 82 per cent of Germans favouring the tax. Even a contingent of bankers supports the idea. In June, 52 former and current financiers wrote to David Cameron and other
European and world leaders calling on them to back FTTs to raise revenue for “people in urgent need at
home and in the world’s poorest countries.”
The group, which included senior figures from the
Rothschild Group, GLS Bank, Goldman
Sachs, JP Morgan, and the Chicago Stock
Exchange, pointed out that the value of financial transactions is now seventy times
the size of the real global economy and that much of this increase is due to
computer-driven trading designed to turn very short-term profits that
do not contribute to markets’ primary functions of raising investment,
allocating resources efficiently and mitigating risk.
They emphasize that numerous countries already have FTTs on some asset classes and these work well. Comprehensive FTTs would, in their view, actually improve the functioning of markets, restoring "the financial sector to its proper role." There are, it seems, still bankers with a conscience.
Other luminaries who support a Robin Hood Tax include Bill Gates, the Vatican, the Archbishop of
Canterbury, the world's major labour leaders, Nobel
Prizewinning economist Joseph Stiglitz and other leading economists. Meanwhile, some powerful players resist the tax, including Great Britain, China, India, the U.S., Canada and Sweden, although some might modify their position if the tax was universal.
Fortunately, supporters currently seem to have the edge.