One hundred of the world�s largest commercial and investment banks that dominate the foreign exchange trading market would be subject to the Tobin-type tax. The top ten control 52% of the market. Citibank is at the top of the list with an 8% market share and a 1998 foreign exchange transaction volume that exceeded the GDP of the US at US$8.5 trillion. These banks have a vested interest in creating and maintaining volatility as profit potential increases in volatile markets.

The Tobin-type tax has an additional and unintended benefit - it could generate enormous revenue. In 1998, the global daily foreign exchange turnover was US$1.98 trillion per day. A phased-in tax of between 0.1 and 0.25% could yield up to US$300 billion annually. In 1998, the United Nations Development Programme estimated that US$40 billion a year for ten years would be enough to guarantee access to basic social services and adequate food, water and sanitation to every person on the planet. A Tobin-type tax, adopted and collected nationally, with a portion of receipts redistributed through a multilateral treaty mechanism or institution, could help eliminate the worst forms of poverty and environmental degradation globally.

A variation on Tobin�s original proposal by Canadian economist Rodney Schmidt addresses the critics who assert the Tobin tax would be easy to avoid and thus ineffectual Schmidt proposes to utilize an existing highly centralized and regulated global structure through with major banks exchange balances on the wholesale market All transactions are tracked electronically; monitoring systems are already in place; all major currencies participate. Because the tax will be collected at centres controlled by the central bank, non-cooperating tax havens could be refused the right to utilize the taxed currency.

In any discussion of the Tobin tax and its variants, the question invariably emerges, �so what�s stopping us?� The biggest barrier to the adoption of a currency transactions tax is not technical or administrative but political. A currency transactions tax is a tax on the most powerful banks and investment institutions in the world. The very idea of a currency transactions tax, of putting people ahead of markets, challenges the dominant economic paradigm of our times.

The risk of future financial, economic and social crisis, however, coupled with the revenue potential for this tax is providing political incentives and opportunities for debate unimaginable just three years ago. In March, 1999, the Parliament of Canada passed a motion in support of a Tobin-type tax by a resounding 2:1 margin. It became the first parliament in the world to endorse the tax and was followed by the Belgian Senate in 2001. The French, United Kingdom, Brazilian and European Parliaments have held debates on the Tobin-type tax and over 600 Parliamentarians from around the world have joined a global campaign in support of currency transactions taxes. In June, 2000, over 160 governments agreed to undertake a study on the feasibility of a currency transactions tax at the UN Social Summit in Geneva.

All these initiatives have been led or facilitated by an emergent global citizen�s movement which is calling for a new people-centred financial order which at its core insists on the governance of global finance in the interest of human development.

More information about the Halifax Initiative conference �Currency Transactions Taxes - From Feasibility to Implementation� including registration forms is available at www.halifaxinitiative.org or by contacting [email protected].

Robin Round

�from Economic Reform, September 2001