This House would introduce a Tobin tax.

James Tobin, a Nobel Prize-winning economist, first presented his plan for a tax on currency transactions in 1978. His plan was to increase slightly the cost of trading in currencies, by introducing a currency transactions tax. Proposals ranged from 0.003% to 0.5%. The tax was intended to discourage speculations which can lead to large exchange rate fluctuations and prevent serious damage to economies. The idea was not met with enthusiasm at that time. In the 1990s, two additional factors triggered interest in Tobin’s proposal. Firstly, the 1970s and 1980s’ confidence in floating exchange rates diminished, as currency instability led to several crises including in Mexico, East Asia, Brazil and Russia. Secondly, as the tax could generate considerable amounts of money, the idea attracted the attention of those concerned with the public financing of development. The Tobin tax, if successfully in place, would generate enough income to support many of the international relief efforts around the world. Given that an international institution is needed in order to oversee the Tax’s enforcement as well as manage the revenue, the United Nations has been named a likely potential manager. The UN has been very receptive to this proposal and sees in it the potential to fund a UN army as well as many of its humanitarian and relief efforts in the developing world. The tax is supported by two groups: less radical liberal economists like Tobin, who believe that the tax would create a sense of stability in currency and financial markets; and development and human rights activists who look at the tax mainly in terms of the revenue it promises to raise and how that revenue could be used in different aid efforts. Proponents argue that a Tobin tax is feasible and would help reduce financial instability. Opponents counter that it is infeasible, and could even worsen economic instability.  The opposition to this tax comes from national governments, and international institutions such as the World Bank and the International Monetary Fund, who see any additional regulation to the liberal global market as a possible threat to further economic development. The US government is among those opposed to the idea of such a tax. However, several countries, such as Chile and Malaysia, have already introduced a tax on their currency transactions  while others have expressed definite interest in doing so, including Belgium, Canada, Brazil and Venezuela. Recently, European heads of state such as Nikolas Sarkozy and Angela Merkel have stepped up calls to introduce a Tobin tax as a way to stabilise Eurozone economies.