> >> the Tobin Tax seems impractical. Which governments would impose the >> tax on a two sided transaction? How could tax regulations be drawn up >> so that they could not be evaded easily through derivatives >> transactions? As Diane Coyle notes, one could simply substitute a >> swap for the straight exchange of currencies which was going to be >> taxed. Moreover, it is doubtful that a low Tobin tax would >> fundamentally alter the balance between the supposedly good >> transactions financing trade and direct investment, which form a very >> small proportion of the total, and the supposedly bad short term >> investment and speculation. >> >> Yours, Rakesh > >I dont see that it is impractical at all. It would probably be sensible >for the tax to be levied on purchases of foreign currency. > >It is possible for states to implement strict currency controls, implementing >a tax on exports of currency would be well within their administative >capacity. while I think about your answer, here is a reference full paper at http://econ.bus.utk.edu/davidsonextra/boulders.html IN THE ECONOMIC JOURNAL, MAY 1997 ISSUE. ARE GRAINS OF SAND IN THE WHEELS OF INTERNATIONAL FINANCE SUFFICIENT TO DO THE JOB WHEN BOULDERS ARE OFTEN REQUIRED?* Paul Davidson University of Tennessee Abstract: This paper criticizes the effectiveness of a Tobin Tax in acting as a deterrent to short-run round trip speculation on exchange rate movements. It is demonstrated that given the usual magnitude of a proposed Tobin tax, the deterrent to short-term speculation will be negligible and in all likelihood smaller than the deterrent to real trade flows and arbitrage activities. Finally an alternative proposal for preventing currency speculations while creating incentives for global full employment, based on Keynes's 1940s writings, is proposed.
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