Tobin tax

["Ian Murray" <seamus2001@xxxxxxxx>]

< http://www.euobserver.com >
10.000 protestors to gather in Liege



The Association for the Taxation of financial Transactions for the Aid
of Citizens (ATTAC) has been campaigning for the Belgian presidency to
take up the controversial debate on the introduction of a
"Tobin-style" tax. Professor James Tobin first proposed a uniform tax
on currency transaction in 1972.The idea of the Tobin tax is to reduce
exchange rate volatility and discourage speculation attacks on
currencies.

The Tobin tax is due to be discussed by finance ministers in Liege on
21-23 September. ATTAC expects 10,000 protestors to gather in Liege
for a demonstration on 21 September to maintain pressure on the
Belgian presidency to continue the debate into introducing the tax.

Arnaud Zacharie, chairman of ATTAC Liege, took the time to speak with
EUobserver.com and explain the potential benefits of introducing a
Europe-wide tax based on the research of James Tobin.

What kind of demonstrations are being planned for the ECOFIN meeting
in September?

The demonstration is organised by trade unions, but it's not a big
demonstration like those planned for Brussels in December. There will
be only 10,000 people in Liege, quite small. The point is that
Europeans can congregate. We hope that the demonstration will be
non-violent. The demonstration is just the first one of those planned
by ATTAC during the Belgian presidency.

Charles Picqué, Belgium's minister for the economy said that he is
pessimistic about how much progress towards the Tobin Tax will be made
by the Belgian presidency. How optimistic are you about what the
Belgian presidency will be able to achieve.

Well, the fact is that our finance minister [Didier Reynders] is a
liberal. He is against the Tobin Tax, but it is he who will speak to
all the other finance ministers. We know that the Tobin Tax is on the
agenda in September because ATTAC put a lot of pressure on the Belgian
presidency. We know that when Reynders speaks about the tax at the
European level, it is not possible to implement it or to have a
political agreement.

If the tax is introduced, isn't there a danger of capital leaving the
eurozone?

This is certainly a major argument from opponents of the tax, but I
think it is not correct. If you look at the situation right now in the
United States, there are taxes on the profits made on the stock
market, but we don't have such taxes in Europe. In this case, why
aren't capital flows leaving the United States for the stock markets
of Europe? This argument is just a way to make people fear the new
tax. I think that the reality is that capital flows go where the trade
is biggest, and the European Union is the biggest trading zone of the
world. With currencies fixed, then the trade is even better because
you can see that your investment in one country is the same as in
another.

What should the revenue that the tax raises be used for?

Our idea is to take one point after one point. For instance, first we
will use the revenue to ensure safe water to people all over the
world, and after that we will ensure schools for everyone, and so on.
The revenues should be used to heal foreign problems once they have
been evaluated. Also, part of the money will be used in Europe. For
example, some may be used to generate employment.

It seems that there is a conflict here. On the one hand, you want to
stop speculative trading, and on the other hand you want to raise
revenues from the tax. Surely, the two objectives are mutually
exclusive?

Yes, of course there is a conflict. We have never thought that this
tax is a miracle tax. We know that if the tax is really efficient
about speculation, then the revenues will be lower. But this is not a
problem for us. We want to stop speculation and to have revenue for
development. In either case, it's good. We know that the Tobin tax
will not stop speculation, which is why we want to put down extra
controls to work in parallel with the tax. We want the Tobin tax to
stop as much speculation as possible and we think that revenues of
about 100bn dollars a year will be a good target.

Will the tax have an effect on non-speculative trading?

No, not so much. When you make an investment - a real investment - you
pass through the financial markets just once. A tax of 0.1 per cent is
not big for a real investment. This is a good thing because it touches
mainly speculators who pay a little tax each time they move from
country to country.

Is it still feasible to introduce the Tobin tax if countries such as,
for example, the United States refuse to implement it?

We think that the tax at a European level is a good one. You know that
there is no world-wide tax now. It seems strange that we are demanding
an international tax, because right now one doesn't exist. We have a
project to create a Tobin-zone with the European Union and other
countries - for example, Brazil, India, and so forth - that also want
this tax. We would create a Tobin-zone with a tax of 0.1 per cent, for
instance, and then for countries not members of this zone we would
implement a higher tax of 1 per cent. Then other countries will find
an interest in joining the Tobin-zone because the tax will be the
world over.

Earlier this year, Fritz Bolkestein, the EU commissioner for taxation,
remarked that the introduction of a Tobin tax would contravene the
Treaty of the European Union. In particular, such a tax would be in
breach of Article 56, which states: "Within the framework of the
provisions set out in this Chapter, all restrictions on the movement
of capital between Member States and between Member States and third
countries shall be prohibited." Do you agree with Mr Bolkestein?

We heard about this argument of course, and then we had Lieven Denys,
Professor of European Fiscal Law at Brussels Free University, respond
to it. This argument is now over because Professor Denys and his
colleagues proved it to be false. Professor Denys' presented his
answer in an essay, I think.

A link to Professor Denys' findings, in French, can be found at the
end of this interview. Speaking before a meeting of economists in
June, Professor Denys argued that member states can create a Tobin tax
with a low tarriff that does not create an effective obstacle to
movements of capital.

Written by Blake Evans-Pritchard
Edited by Lisbeth Kirk

Opinion
Lieven Denys, in French - http://attac.org/fra/list/doc/denys.htm
Related article
EUobserver.com, archives -
http://www.euobserver.com/index.phtml?selected_topic=none&action=view&;
article_id=2790
Website
Attac - http://www.attac.org