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Robin Hood tax could shrink currency markets by 14% |
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Wed 10 Feb 2010
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LONDON (SHARECAST) - A number of charities and celebrities are throwing their weight behind calls for global governments to implement a ‘Tobin tax’, a tax on what the organisers call ‘speculative banking transactions’.
Charities and aid organisations such as Barnado’s, Christian Aid, Comic Relief, Oxfam and the Salvation Army have signed up to the idea of a ‘Robin Hood tax’ on transactions between banks, with part of the money being used to fund the fight against global poverty and climate change. Half of the money raised through the proposed tax in the UK would be diverted to prevent cuts in crucial public services.
The idea behind the tax is decades old and was popularised by Nobel Laureate economist James Tobin, who suggested a currency transaction tax in 1972.
The latest iteration of the idea suggests that the tax rate would range from 0.005% on the value of currency transactions to 0.5% of the value of equity transactions. The people behind the Robin Hood tax speculate that the tax, if imposed worldwide, could raised up to $400bn each year.
‘Ten years ago it was felt that a financial transaction tax was too complex to collect, but a lot has changed in the last decade, as banks have improved their IT infrastructures (such as the Real Time Gross Settlement – RTGS) to help drive down trading costs,’ the pressure group’s web site states.
The organisation insists that the charges will not be passed on to consumers because they exclusively target transactions between financial institutions. It does, however, concede that the introduction of a 0.005% levy on foreign exchange trades could shrink the value of transactions in the currency markets by 14% due to the extremely thin bid-offer spreads on many currency trades.
A video promoting the idea has been made, starring ‘Shaun of the Dead’ star Bill Nighy and directed by ‘The Boat That Rocked’ director and writer Richard Curtis.
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