Tobin Tax, Robin Hood tax, financial transaction tax… three different names for a same project which has been discussed for more than 30 years. James Tobin, Economic Nobel Prize winner, is the creator of this tax. This was in 1972, one year after the breakdown of the Bretton Woods system and the substantial liberalization of global capital flows. James Tobin –among many others- feared the extreme exchange rate volatility and global excesses on financial markets. To prevent such problems from occurring, James Tobin proposed a global tax with a very low rate but a large tax base. At this point, redistribution of the revenues was neither an objective nor an issue.
The financial transaction tax made a comeback a few years ago for its huge potential as a source of funding for the Climate Funds. Central point of the international negotiations on climate change, the funding of such a program has to face the lack of political will. In December 2014, after several weeks of discussion, the project of implementing the Tobin tax in Europe failed.
Back in 2012, 11 European countries worked towards the creation of a regional financial transaction tax. In 2013, the European Commission made a proposal to tax actions, obligations and financial derivatives. But since, an intensive lobbying from financial players succeeded in tackling this proposal. The French Economics Ministry changed the project to exclude 97% of the financial derivatives. Originally, this tax was supposed to generate $35 billion in France but these changes reduced them to 4 $billion.
With an objective of $100 billion in 2020, the Green Climate Funds, which is expected to become the main vehicle for securing and distributing finance for climate and adaptation, especially towards developing countries, is far from having reached its goal. The Tobin tax is now definitely considered as a viable option. A global agreement on the matter is very much needed to create an efficient and sustainable system.
French President François Hollande took the engagement to implement the financial transaction tax by the end of 2017. With the climate conference (COP21) taking place in Paris in December, it would be a significant progress and a strong message towards developing countries and for the climate.