Why is the Currency Transaction Levy sometimes referred to as a Tobin Tax?
The Tobin Tax, as it came to be known, was first proposed by James Tobin in 1973 as a 1% charge on all foreign exchange (FX) transactions to ensure currency trading was linked to cross-border trade in goods and services. His aim was to throw sand in the wheels of the global FX market by disproportionately taxing short-term, high turnover currency trading. He argued that this would reduce speculation and lower market volatility, raising hopes that a Tobin Tax could mitigate the increasingly frequent and hugely damaging currency crises. The most modern form of the CTL, however, is quite explicit in its objective to raise revenue in a predictable and stable manner. This approach is embodied in the work of Rodney Schmidt (2001), where a tiny levy of 0.005% would be applied to every transaction of a given currency. (For more information, click here).
