Now's the time for a Tobin tax | George Irvin | Comment is free | guardian.co.uk .
One of my co-authors reiterates the case for a Tobin tax in the UK.
There's one very good reason for it: it's progressive whereas VAT is regressive.
Second, without a shadow of a doubt it can work.
Its time has come.
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So Mr Irvin thinks that there is £34 billion in taxes to be made from sterling FX business when the entire profitability of UK banks is less than that figure? Dream on. Banks aren’t going to trade FX at a loss for the dubious privilege of paying a transaction tax.
The most likely outcome of a tax set at more than 1bp is that FX trading would fall away – the 80% of the market described as “speculative” would fall away and spreads would widen for trades for currency buyers who are not market makers.
Fortunately for the rest of the world, they realise that an 80:20 ratio of market makers to end purchasers is entirely normal in a market with such high liquidity and low spreads as today’s FX markets – which have very little to do with the credit problems of the last few years (wrong solution to the wrong problem).