Argument Against The Tobin Tax
Financial transactions tax so-called ‘Tobin tax’ is a tax on the foreign exchange transaction. The tax was suggested by Noble Memorial Prize Economist James Tobin. After 1972, United States dollars (USD) was not packed with gold, and UDS was a reserve currency to other currency. He introduced this tax because it could maintain the stability of international currency and global economy. However, recently, the Robin tax was raised again because of the financial tsunami in 2008. A lot of European economies were affected by the speculation of investors. Investors trade with exchange rate and they just speculate in the short term. This may lead to huge fluctuation of exchange rate and instable system. Therefore, James Tobin claimed that the objective …show more content…
According to the view of The APEC Business Advisory Council which has twenty-one country members, there are three arguments against the Tobin tax. The first rationale is that the Tobin tax will discourage the activity in the financial markets. The tax is perceived as the additional charge to investors and they become more cautious to purchase or sales of equity and security. This leads to decrease the volume of trading in the financial market. Secondly, thanks to inactive financial market, the listed companies have less liquidity. More importantly, the Tobin tax will be unfavorable to the recovering …show more content…
Take Spain as an example. Spain is one of European countries suffering from the most serious impact from Financial Tsunami in 2008. In Spain, there is a high unemployment rate now. According to the data from Trading Economics, the unemployment rate in Spain increases from about 10% to nearly 25%. Once the tax is implemented, due to multiple effects from financial market, the unemployment rate would increase continuously. Secondly, Spain does not fully recover from the crisis. From the statistics of Trading Economics, The IBEX 35 Index has not reached the price in 2008. For a recovering county, Spain is not ready to bear another attack from Tobin tax. The last point is that the example from Sweden can tell that Tobin tax cannot work. Spain as a similar economic system should take it as a former
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