Treasury moots Tobin Tax on financial transactions

A tax on financial services transactions has been mooted by the
Treasury.

In a discussion paper, Risk, reward and responsibility: the financial
sector and society, the Treasury is considering a “Tobin Tax”, which could
raise “very large” revenues.

“A financial transaction tax is one proposal that has been put forward as a
potential method of ensuring that the global financial services sector makes a
fair contribution,” it stated in the paper.

“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.

“Another is that the revenues raised from a transaction tax could potentially
be very large, although the tax would need to be designed to introduce minimal
economic distortions.”

Critics of the Tobin Tax have warned that such a scheme would be impossible
to manage effectively.

Further reading:

Click
here for the Treasury’s discussion document

IMF to look again at Tobin
Tax