CANNES - While the Greek bailout and stimulus package dominated discussion among the Group of 20 (G-20) major industrialized and emerging market economies at the high-level summit in Cannes, France, last week, the proposed financial transactions tax (FTT) received meagre attention.
Dubbed by some economists and activists as the "Robin Hood tax" or "Tobin tax", the FTT has enjoyed marginal but sustained support from hard-hitters in the G-20. The purpose of a Tobin tax is to raise money by setting a very low taxation level, of hundredths or thousands of a percent, on a very large number of transactions.
In February, French President Nicolas Sarkozy nudged Microsoft co-founder Bill Gates to prepare a report on the enormous potential of such a tax to jump-start development in poor countries, particularly after the 2008-2009 crash pushed many donor nations to slash their official development assistance to the global south.
A "technical note" from the report, released at the World Bank and International Monetary Fund meetings in Washington in September, claimed that the adoption of an FTT by the G-20 or even the European Union could generate "substantial resources.
According to the note, "Some modeling suggests that even a small tax of 10 bp [basis points] on equities and two bp on bonds would yield about [US$] 48 billion on a G-20-wide basis, or [$]9 billion if confined to larger European economies. Some FTT proposals offer substantially larger estimates, in the [$]100-250 billion [dollar] range, especially if derivatives are included."
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Push on for Tobin tax
by Cleo Fatoorehchi
The significant point about this transaction tax crafted by Bill Gates is that it would recycle funds from the top, where they are primarily saved, to the bottom, where they would be spent, thereby increasing global demand, especially in the developing countries, where demand is lagging most.