Why the poor reception? For a tax that’s attracted high-profile backers like Brown and Sarkozy, its track record is thin. When Tobin first proposed the idea in 1972, it was seen as a way to stop currency speculators after the collapse of the Bretton Woods system of fixed exchange rates, but it was never imposed. Sweden enacted a tax on certain financial transactions in the 1980s but ditched it in 1991 after trading volumes sank.
Today, there are bigger obstacles to its implementation. First, there are the tax’s tricky practicalities: Which financial transactions and institutions do you target? And who pays, administers and regulates it? But possibly more importantly, every major financial center would need to be on board for the levy to be effective. Investment banks wouldn’t likely leave Britain for cheaper foreign currency”“trading in Macedonia, but they might well if that opportunity was in Manhattan. Advanced economies imposing the tax unilaterally “would see their financial markets decimated,” Howard Wheeldon, senior strategist at BGC Partners in London, wrote in a note to clients on Monday.