Vol.7 No.12, 23 May 2007
Currency tax to tackle poverty
The Guardian, Larry Elliott. Monday May 21, 2007
The City's first attempt at a tax on foreign currency dealings will be launched today with the start of a week-long levy imposed by one firm on its trades. After years of campaigning since American economist James Tobin first proposed throwing sand in the wheels of speculation, the specialist currency company INTL said it would experiment with the scheme.
The firm will levy 0.005% on its trades and expects to raise between £5,000 and £10,000 for development charities in a week of trading.
Since Mr Tobin floated his idea in the early 1970s, opposition has focused on the perceived difficulty in monitoring trades in the foreign exchange market and the fear that a tax large enough to combat disruptive speculation would drive business to lightly regulated offshore locations.
Campaigners, however, believe that the advent of fully fledged electronic markets has made it possible to monitor every trade. They also believe that the best way to provide legitimacy for a currency transaction tax is to set it at a low rate and link it to raising money to tackle poverty.
David Hillman, coordinator of Stamp Out Poverty, said: "The success of this idea lies in its simplicity. Currency transactions are almost entirely electronic - so to skim a tiny amount to help alleviate poverty in some of the world's poorest countries would be easy to implement. INTL's scheme goes a long way to proving to rich country governments that this is a workable, realisable idea."
Philip Smith, director at INTL, said: "With minimal impact on our profits we are able to make a beneficial contribution to the lives of people in a poorer country - the more business we do, the more benefit to the developing world. If we can act as the first rung on the ladder towards this new way of raising aid revenue through currency transactions, we'll be a very proud company."
© South African New Economics Network 2007. Page generated at 09:30; 22 September 2007