Whats wrong with the Tobin Tax

graeme at 1:54 p.m. Wed 17 Feb 2010

The proposed .05% tax (a Tobin tax, although sometimes referred to as a Robin Hood tax) is generally very poorly understood. Especially with regard to the extent to which the number of transaction will reduce as a result, and therefore its effect on the profitability of banks, and, the drastically lower amount of revenue it will produce.

Giles Wilkes, the Chief Economist of Centre Forum, has a flawed (by failing to take into account that the rate would vary between 0.5% and 0.005% depending on the type of transaction), but good analysis split across two blog posts: one looking at FX spreads and another looking at the amount that can be raised in the context of bank profits.

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