Tobin
tax would snarl international trade and investment
 |
| Turbulence is a way
of life on financial markets |
Paris,
20 December 2001 - The International Chamber of Commerce has condemned
the proposed "Tobin tax", designed to deter speculative capital flows,
as harmful to international trade, economic growth and businesses throughout
the world.
ICC President Richard D.
McCormick and other leading members of the world business organization commented
in a statement on the proposal now being examined within the European Union
for the tax, a levy on turnover in currency markets.
They said: "The tax
would throw sand in the wheels of international trade and investment and would
harm the prospects for raising global economic growth and the welfare of all
peoples." Far from helping developing countries, the tax would hurt the
smallest nations most.
Introduction of the tax
- named after the American Nobel prize-winning economist Professor James Tobin
- is widely supported in the anti-globalization movement. A major objective
of proponents is to use revenues for poverty reduction in developing countries
- and ICC pointed out that this was never a main motivation of Professor Tobin
when he raised the idea 27 years ago.
The ICC statement was issued
by its three-member Presidency - Mr McCormick, who serves on the boards of several
major US companies, Jean-René Fourtou, Vice-Chairman and Group President
of Aventis; and Adnan Kassar, Chairman of Fransabank in Lebanon.
They said: "The tax
would not prove feasible in practice since it would require uniform implementation
throughout the world and would need to encompass, not only spot transactions,
but also substitutes and supplements such as currency swaps, forwards and futures,
in order to limit evasion."
The ICC statement listed
disadvantages of the Tobin Tax:
· Minor currencies
might become more volatile and vulnerable to speculative attacks;
· Increased costs would cause pension funds and other portfolio managers
to increase their home bias. Less capital would be available for international
capital markets;
· A Tobin tax would not prevent speculative attacks on a currency where
the expected gain might be high. It could not replace unsustainable economic
policy - usually the main reason why a currency comes under attack;
· The tax would be impracticable since it would require worldwide coverage,
or at least coverage encompassing the G10 countries, supplemented by a penalty
on transactions to tax havens. Unilateral implementation would move currency
trading offshore.
Full
text of ICC Presidency statement