What do you guys think of the Tobin tax?

The idea is obviously, noble but non-accomplishable, since you have all the multi-national and bilateral tax treaties around the world. David

Thanks for your answer David.I think a lot of people share your opinion ("noble but not applicable").What i would like is to go more into the details: why is it non applicable?You say it would be in contradiction with existing treaties:1. again, which treaties (sorry i don't know much about the subject!)? and why is there a contradiction?2. assume we've established it is in contradiction with existing laws. Well, the idea of a bringing in a new law is to modify/getting rid of some exisiting laws, isn't it?

Diceman,By treaties, I meant that despite the noble idea of the Tobin tax and it implementations on the national and the multi-national community, tax treaties always comes first. In a usual circumstance when the government of the United Kingdom set up tax treaties with other foreign governments, the implementation that requires in the Tobin tax will have to be reflecting on the multi-national treaties. Therefore, it highly unlike that other foreign governments will agree to renegotiate the treaties just because the government of the UK would like to implement the Tobin tax law in all levels.David

Davidso you're saying that if only one country wants to do it it is not possible. But if all countries agree to do it then it would be possible?i.e. you're saying the only problem is to convince the other countries involved in these tax treaties?

I find the argument "we can't do it cos it's annoying to renegotiate the other treaties" a bit short...

<< so you're saying that if only one country wants to do it it is not possible. But if all countries agree to do it then it would be possible? >>According to the current proposals - yes, but not all countries, more likely the UK-EC tax treaties and perhaps the UK-USA as well. << you're saying the only problem is to convince the other countries involved in these tax treaties? >>Not at all, if the proposal is to adopt in the internal tax policy frame only, then the bilateral treaties might be irrelevance.<< I find the argument "we can't do it cos it's annoying to renegotiate the other treaties" a bit short... >>Tobin tax proposals range from national adoption, to multilateral cooperation, to universal treaty adoption

I really, really, really don't want to know but could someone say just what is the Tobin tax??? P

<< could someone say just what is the Tobin tax??? >>"Tobin Taxes are excise taxes on cross-border currency transactions. They can be enacted by national legislatures, followed by multilateral cooperation for effective enforcement. The revenue should go to global priorities: basic environmental and human needs. Such taxes will help tame currency market volatility and restore national economic sovereignty". (The name Tobin Tax and the original concept derives from James Tobin, a Ph.D. Nobel-laureate economist at Yale University.)

check out www.tobintax.org.ukapparently there are differents report trying to show/showing (?) that it is feasible.i haven't read them yet as i have problems with explorer at the moment (only www.wilmott.com seems to work properly!!)as David says, the idea is to put a very small tax on financial transaction and use the profit for environment/human needs.in one hand it would penalise speculators ((which is supposed) to be "good"), but on the other hand it would penalise people using financial products in a good way (e.g. buy option as an insurance) (which is (supposed to be) "bad")...

Even setting aside practical difficulties of defining what constitutes a speculative flow, administering the tax collection process and so on, there is a deeper problem with Tobin taxes. This is that the equilibrium tax rate is vanishingly small.Suppose that all governments reached an agreement to charge a Tobin tax of x%. In this case any single government would then have an incentive to charge only half of x%. In the absence of significant sunk costs of transferring FX dealing operations, all speculative flows would then go through the country that charged only half of x%, thus leading to a huge increase in tax revenues for the government of that country. Other governments would then decide to charge only a quarter of x% and so on until a very low equilibrium tax rate asserted itself. However, even then there are two further problems. One is that the administrative costs of collecting the tax may then exceed the tax revenues thus giving governments an incentive not to bother collecting the Tobin tax.The second issue is that, from a government's point of view, there is a 'public good' value associated with having speculative flows go through your country. Speculative flows going through your country means having a significant number of financial institutions in your country, and therefore increased corporation tax receipts, increased income tax receipts, a multiplier effect through the economy from the spending of the corporations and individuals involved in managing speculative flows, and so on and so forth.Therefore, even if practical issues could be dealt with, the equilibrium rate of the Tobin tax is very low. By the time admin costs and public good value are introduced, the incentive for governments to introduce a Tobin tax is zero.But that's just what I think ...

the EU has been seeking tax harmonisation of corporate income tax for some time, but is held up by a major obstacle - governments are reluctant to relinquish control of taxation because it is a tool of fiscal policy. which, apparently, is back in vogue. so why (and how) would the tobin tax be implemented between more countries, with perhaps more disparate interests?and "restore national economic sovereignty" is completely normative. it's what the EU is moving away from. one could, of course, argue that specualtion is a stabilising and positive influence anyway, and that it should be encouraged, not taxed. perhaps we should subsidise it...

Paul,I believe that Tobin's q appears in Dixit and Pindyck's Investment Under Uncertainty...

Tobin taxes, first suggested by Keynes as a way to 'throw sand in the gears' and to make investment predominate over speculation, simply has no empirical support. The most convincing demonstration of this is by looking at housing prices, one of the more high-transaction-cost assets. Over 'investment horizons', housing exhibits no less volatility than other assets. Other studies have looked across different exchanges (which have different commission and bid-ask structures), and liquidity wasn't found to increase volatility. this idea represents the essense of short-sided thinking, in that many people believe you can legislate prices, which are merely symptoms of underlying realities (uncertainty, new supply/demand situation). Sort of like the rule prohibiting short selling on a downtick--why not ban all selling?