Project Description

The idea of creating tax on trading which result in finance have created in 1972 by Mr James Tobin, a political teacher at Yale University and Harvard University (America) and have won a nobel award in 1981 which makes the tax called Tobin Tax.

  • At the beginning Tobin have only thought of creating tax on currency market only. The main goal is to limit the trading activity such as speculative which brings stability of the international exchange rate. On the other hand, the money which is collected with this tax will be used to help the country which needs development. This idea is later used on financial equipment such as shares, debts and derivatives.
  • Taking tax on financial product means when buying the products, you have to pay the tax with rate of 0.1%, 0.5% or 1% of the product.
  • Generally, we see that buying every product have to pay tax, even buying food and daily use equipment needs to pay tax as well, it is VAT (Value Added Tax). The trading of financial product doesn’t need to pay tax which leads to the criticizing that it is not fair. Poor people who needs to buy daily use products need to pay tax when rich businessman who are trading financial product doesn’t need to pay tax.
  • The financial crisis in 2008 and the debt crisis of Europe have leads to the support of tax over financial product have gained. The supporters from France thought that cutting tax from those businessman not only help the stability of the exchange rate but also helps the deficit of the state as well.
  • The Europe Committee have requested to create tax on financial product in the entire European Union. This request have been supported by Germany, France and Italy, but England rejected.
  • Everybody feared that if tax is not created in every country, businessman will move from country with tax to the country without tax. In this case, country with tax will face financial problems. Income from tax will decrease. The bankruptcy of bank and financial institution can lead to unemployment. The financial stability might not be guaranteed, because if the financial crisis occurs in other country, it can still be reversed.
  • Sweden had been through this bitter experience. In 1984, Sweden had decided to establish a tax on stock trades and set the rate to 0.5%. However, just a few weeks after the creation of this tax, trading activities in Sweden had fallen up to 85%. The money from the tax collection was estimated to be 1,500$ million per year when it’s only 50$ million in reality. The Swedish government decided to remove this tax in 1991. At the moment major countries such as the United States, Britain, Canada, china and India are all anti-establishment of financial products.