Beyond Keynes, Volume One
Edited by Shelia C. Dow and John Hillard
Philip Arestis and Malcolm Sawyer I INTRODUCTION There has been considerable interest in the idea of a tax levied on foreign exchange dealings, ﬁrst suggested by James Tobin in his 1972 Janeway lecture at Princeton (Tobin, 1974; see also 1978). Some oﬃcial interest in a transactions tax has been expressed by United Nations Development Programme (1994) and UNCTAD (1995) who have seen its possibilities for raising large amounts of money which could be used to ﬁnance development. The purpose of this chapter is to evaluate the proposals for a tax on foreign exchange dealings. We assume that levying such a tax on a national basis would not be feasible and do not discuss that possibility further. We also assume that the tax would be levied on any transaction which involved the exchange of a ﬁnancial asset denominated in one currency for a ﬁnancial asset denominated in another currency (cf. Tobin, 1978: 159; Akyüz and Cornford, 1995: 190). II RATIONALES FOR A TRANSACTIONS TAX Three rather diﬀerent (but not mutually exclusive) sets of reasoning have been advanced in support of a transactions tax (which we will use as shorthand for a tax on foreign exchange dealings). The ﬁrst is that there is a sense in which the volume of foreign exchange transactions is excessive, being many times greater than the volume required to ﬁnance trade. The most widely cited ﬁgures on turnover on the foreign exchange markets are summarized in Table 13.1. World trade for 1995 was a...
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