Nobody Believes In The Tobin Tax, Not Even Prof. Tobin

by Jeremy Hetherington-Gore, Tax-News.com, London

30 August 2001

Lionel Jospin's conversion to the Tobin tax (a levy on international financial transactions to finance third world development) has quickly been understood as a simple electoral gambit to gather in the support of the estimated 5% of French voters who are sympathetic to the aims of the 'anti-globalisation' movement, itself led largely from France. A spokesman for Attac, the French organisation which has been a key organiser of anti-globalisation protests accused Mr Jospin of trying to "bury the Tobin tax while at the same time giving the impression of being in favour of it".

Anyway, the tax itself has been tacitly disavowed by its originator, Professor James Tobin. First of all, he doesn't think it will be implemented: "Having a tax of this kind adopted depends on international agreement," he says. "And since the US is dead against it, it is not going to happen." He himself has always stressed that the idea of the tax is not be to block international capital flows, or to raise resources for fighting poverty, but to stabilise currency markets by inhibiting short-term speculation, allowing countries to pursue more independent economic policies.

Whatever you think of its economics, the main problem with the tax is enforcement. Prof Tobin says 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 says that international financial markets are now so mobile that it would be relatively easy for currency dealing to escape to offshore tax havens.

The anti-globalisation movement is of course not bothered by such niceties as whether the tax will work or not; for them (and for Mr Jospin) this is just tokenism. Everyone concerned knows the tax will never be imposed, but it is a convenient mantra with which to beat the globalisers. For the rest of us, we can just smile at the irony of the anti-globalisers proposing a tax which can only work if the financial industry world-wide is integrated and regulated on a global basis.

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