ABSTRACT
Introduction The purpose of this chapter is to discuss the contribution which a tax on foreign exchange dealings (often called a Tobin tax) could make to world economic governance. The Tobin tax, at least in its modern formulation,1 began with Tobin’s 1972 Janeway lecture at Princeton (Tobin, 1974; see also 1966, 1978; and Eichengreen, Tobin and Wyplosz, 1995) in which he specifically proposed a tax on foreign exchange transactions as a way of limiting speculation, enhancing the efficacy of macroeconomic policy in the process and raising some tax as a byproduct.2 Some official interest in a transactions tax has been expressed by the 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-Tobin suggests that ‘the revenue potential is immense, over $1.5 trillion a year for the 0.5% tax’ (in UNDP, 1994, p. 70) (see also Michalos, 1997, pp. 23-4).
