Brussels, 05/01/2001 (Agence Europe) - In a working document of the Economic Affairs Series of the European Parliament's Studies Directorate General, entitled "The feasibility of an international "Tobin tax", Ben Patterson and Mickal Galliano consider that whatever the preferences between the arguments for or against this tax, first proposed in 1972 by Professor James Tobin to "throw some grains of sand into the wheels of speculation", it probably is but a question of a "solution of second choice". The authors wonder whether the introduction of such a tax would be worth the efforts it would entail, and consider that, were it simply a solution to exchange rate volatility, one should probably have to answer: "no", as it has not been established that its effect of deterring destabilizing speculation would win the day over the harm it could cause to stabilizing operations. According to them, it is above all problems of international control and tax evasion that lead one to doubt that such a tax could ever really be effective. At the same time, Messrs. Patterson and Galliano note that, as source of revenue for international organisations and for development policies, the tax represents a great attraction, as, given the difficulties financing aid to development and refugees runs up against, as well as peacekeeping operations, even a low rate tax "would already provide considerable change". (Patterson and Galliano recall that a Tobin tax would be levied on currency exchange operations at a uniform ad valorem rate, but a low one, and that Professor Tobin had himself suggested rates of 0.2%, 0.5% and 1%). Recall that the Canadian Parliament had voted on a motion for the introduction of a Tobin tax and had urged the Canadian Finance Minister to promote this initiative within the G7, the authors consider that, if to tackle speculation one had to chose between the tax and the introduction of controls over capital movements, the option of the Tobin tax would certainly not be without its attraction.
You may recall that the European Parliament had unsuccessfully tried to adopt a resolution in January of last year calling on the European Commission to submit a report on the feasibility of the Tobin tax, and that, during the debate, Commissioner Frits Bolkestein had opposed such a measure, claiming, in particular, that the tax would not be effective in combating attacks on currencies, whereas it would risk leading to a relocation of certain financial activities to offshore areas and even have negative effects on internatioal growth. (See EUROPE of 22 January, 2000, p.13).
(Internet site: gpatterson@europarl.eu.int)