A “Tobin” tax is workable

The Times leader on Friday branded as “unworkable” the tax on currency transactions which the Treasury now considers as a potential measure to “reduce the burden on society of financial sector failures”.

But, on the contrary, the development expert Rodney Schmidt has demonstrated the practicality for countries to take unilateral action which imposes a levy on their own currency’s transactions.

According to Schmidt, principal researcher for the Canadian development non-governmental organisation, the North-South Institute, a tiny levy of 0.005% would be applied to every transaction of a given currency.

A deacade ago, when War on Want launched its campaign for such a tax – named after US economist James Tobin – the world was emerging from a financial crisis not unlike today’s.

Millions of workers in Indonesia, Thailand, the Philippines and South Korea lost their jobs and their livelihoods when the speculative bubble of “hot money” burst around them. Twenty million people fell below the poverty line in Indonesia alone.

There is now considerable political momentum in Europe and the wider world behind a tax that would cover the full range of financial transactions, not just currency speculation. Several such taxes already exist, of course, including the 0.5% stamp duty already payable on all UK share dealings.

Even at a lower rate of just 0.05%, an Austrian think tank have indicated that a standard tax across stocks and shares, currencies, derivatives and other financial transactions could generate a massive $700bn (£420bn) a year. The trillion dollar bank bailouts have plunged our national economies into long-term debt, threatening public services cuts and thousands of jobs.

The billions that could be raised by a financial transactions tax offer a chance to recoup those losses and to direct funding towards frontline public services, anti-poverty programmes or adaptation to climate change. The forces of reaction may be massing in opposition, but this is a battle we cannot afford to lose.

Our guest writer is John Hilary, Executive Director of War on Want