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Tobin tax

A Tobin tax refers to the suggested tax on all trade of currency across borders. This is supposed to put a penalty on short-term speculation in currencies. The proposed amount of the tax would be low, between 0.05 and 1.0 per cent.

The president of Venezuela, Hugo Chavez, recently announced that Venezuela is currently studying the implementation of such a tax.

This tax would be very difficult to be implemented by a single nation, many argue it would thus be best run by an international institution. It has been proposed that having the United Nations manage a Tobin tax would solve this problem and would give the U.N. a large source of funding independent from donations by particiapting nation states.

Another difficulty is that this tax is meant to limit the negative effects of the globalization whereas the major economic institutions like the World Trade Organization and the World Bank are essentially pro-globalization.

The name comes from the economist James Tobin.

See also ATTAC (Association for the Taxation of financial Transactions for the Aid of Citizens) an organization that promotes the idea of a Tobin-type tax.

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