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The Tobin Tax Initiative: Mulitlateral Cooperation to Tax Currency Speculators

From: janice@ihug.co.nz (janice)
Date: 23 Aug 1998 21:22:39 -0400



The Tobin Tax Initiative:
Multilateral Cooperation to Tax Currency Speculators

By Soren Ambrose


List of Principles for the Tobin Tax Initiative:

1. The financial crisis in Asia and elsewhere is adding to human suffering
which must be alleviated. When currency is devalued, the purchasing power
of citizens plummets, food and basic items become too expensive, the
environment is less protected, and jobs are lost. This crisis exacerbates
existing problems, such as the widening gap between rich and poor, the
strain on the global environment, and high unemployment.

2. One of the causes of the financial crisis is the large volume of
currency speculation that now occurs on a global basis. The foreign
currency exchange has grown recently to over a trillion dollars daily, much
larger than all the stock exchanges of the world. This market is so large
and volatile that government central banks can no longer adequately protect
the currency of their own nations.

3. The existing institutions that regulate monetary systems have inadequate
and sometimes even destructive policies to deal with the crisis. For
example, the austerity programs of the International Monetary Fund increase
the level of suffering for those with the least "safety nets," while doing
little to prevent destructive volatility. Reform of these institutions is
an essential part of any effective solution to the crisis.

4. Reforms should include mechanisms to reduce the volume of destabilizing
capital flows, through a transaction tax on currency speculation. Commonly
but not necessarily called the "Tobin Tax," after the Nobel economist James
Tobin who originated the concept, this tax would deter short-term or
overnight trades, and thus shrink the volume of daily currency trading from
its present trillion dollar daily level to a much smaller exchange, as it
was until the late 1970s. Such a shrinkage would restore each nation's
ability to control its own currency, would generate revenue for worthy
programs, and would reduce the harmful consequences to the poor from
currency instability.

5. To effectively reduce market volume, the tax percentage must be large
enough to reduce incentives for overnight speculation. At the same time, it
must be small enough to leave longer-term currency trades intact. Proposals
range from .1% to .5% per transaction. The overall remaining volume would
be enough to create sizable revenue.

6. Adoption by the major currency nations of the Tobin Tax mechanism would
accomplish the volume-shrinking goal, so the adoption need not be universal
to be effective. After alleviating the initial crisis, universal adoption
should be the goal.

7. Collection and enforcement of the Tobin Tax are considered to be
economically and institutionally feasible, and concerns regarding tax
avoidance could be dealt with through adoption of regulatory mechanisms.

8. The annual revenue could be quite large, over one hundred billion
dollars by some estimates. Therefore, baseline criteria for allocation to
meet basic needs first should be established. Basic human and environmental
needs must be met first, utilizing existing international agreements such
as those addressing environmentally sustainable development, climate
change, and hunger.

9. The revenue should go partly to the nations involved in each particular
transaction, and partly into an international fund for less developed
nations. The international portion of the revenue should be set aside in a
series of earmarked trust funds for basic needs. These trust funds should
be cooperatively administered in an open and democratic fashion. Agencies
should cooperate with local civil society to provide actual services for
basic needs, such as disaster aid and food distribution, small-scale
agriculture and reforestation, health clinics and disease prevention, local
water systems and pollution control mechanisms. Such administration should
occur within the framework of producing local jobs, while ensuring adequate
environmental safeguards, and protection of the rights of workers and other
citizens.

10. Political will is the key to successful adoption, and grassroots
support is essential to educate decisionmakers regarding this opportunity.
We encourage decisionmakers to seek adoption and implementation of a tax on
foreign currency speculation, and we encourage policy proposals that
reflect this List of Principles.

Mission Statement of the Regional Advisory Committee for the San Francisco
- Bay Region:

To raise the level of awareness of the Tobin Tax Initiative among
grassroots opinion leaders, towards adoption and implementation of a tax on
currency speculation in the international arena. Special attention should
be given to implementation criteria; to involvement of the international as
well as domestic progressive communities in policy development; and to
building a grassroots support base for this effort, utilizing existing
networks wherever possible.

The list of supporters provided with this document is called the "San
Francisco - Bay Area Regional Advisory Committee Members or Supporting
Participants as of July 31, 1998"

It includes academics, lawyers (including someone from the National Lawyers
Guild), several 50 Years members (Anuradha Mittal, Kevin Danaher, Juliette
Beck, Bill Ferguson, Rich Plevin, Christopher Myott, Ron Stief of CEEP,
Kelly Quirke of RAN, Patrick McCulley of IRN, and folks from EDF and Sierra
Club), Josh Karliner of "Corporate Watch," and Laura Soriano Morales of
SAIIC. 









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