France Ready To Adopt Tobin Tax If EU Does The Same

by Ulrika Lomas, Tax-News.com, Brussels

22 November 2001

France's parliament has decided in favour of the controversial Tobin tax but has declared that it will not implement the tax unless all other member countries of the European Union agree to do the same.

The Tobin tax, named after Professor James Tobin of Yale University, who proposed it in the seventies, applies a minute percentage levy of no more than 1 per cent to all foreign exchange transactions with the aim of raising funds for projects in developing countries, clamping down on currency speculation and helping to offset any negative fallout from globalisation.

Parliament's decision means that France will be the first of the EU member states to accept the principle of the tax, and is only the second country in the world to do so after Canada. 'Our aim is to appeal to other European parliaments to follow us,' said Gerard Fuchs of the ruling Socialist party.

However, not all were supportive of Parliament's ruling: 'This is a little fluttering of the wings intended for the people, to make the people believe that something has been done,' claimed Georges Sarre of the Citizens' Movement.

To date most finance ministers and economists have been unanimously against the tax, saying that what might have been appropriate in 1972 when it was first mooted by Professor James Tobin, it simply wouldn't work in today's liberalised global markets.

The tax itself has been tacitly disavowed by Professor Tobin himself who doesn't think it will be implemented: 'Having a tax of this kind adopted depends on international agreement,' he has previously said. 'And since the US is dead against it, it is not going to happen.'

The main problem, he has claimed, with the tax is enforcement. The Professor has said that at least the top 15 or 20 world centres for currency dealing would need to agree to levy the tax for it to stand any chance of working, and he added that international financial markets are now so mobile that it would be relatively easy for currency dealing to escape to offshore tax havens.

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