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Tobin tax facts for kids

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A Tobin tax is a special kind of tax on money that moves between different countries. Imagine someone in one country wants to change their money (like US dollars) into another country's money (like euros) to buy something or invest. This tax would be a small fee added to that exchange.

The idea for this tax came from an economist named James Tobin. He thought it could help stop people from quickly buying and selling currencies just to make a fast profit, which can sometimes make money markets unstable. The tax would be very small, usually between 0.1% and 0.25%.

The idea first came up after August 15, 1971. On that day, the US President Richard Nixon announced that the US dollar would no longer be directly exchanged for gold. This change ended a system called the Bretton Woods system, which had kept currencies stable for many years. James Tobin suggested his tax as a way to bring back some stability to international money exchanges. He even won a Nobel Prize in Economics in 1981 for his work.

For over 20 years, people didn't talk much about the Tobin tax. But in 1997, Ignacio Ramonet, who edited a newspaper called Le Monde Diplomatique, wrote an article titled "Disarming the markets". This article brought the idea back into the spotlight. Ramonet suggested creating a group to push for this tax, which became known as ATTAC. This group's name stands for "Association for the Taxation of financial Transactions for the Aid of Citizens." Since then, the Tobin tax has been a big topic in the antiglobalization movement and is discussed not just by experts but also by regular people and in parliaments around the world, like in the UK and France.

Why a Tobin Tax?

The main goal of the Tobin tax is to slow down very fast, short-term money trading. This kind of trading is called "speculation." When people quickly buy and sell currencies, it can sometimes cause big ups and downs in their value. A small tax would make these quick trades less profitable, encouraging more stable, long-term investments instead.

Tobin Tax Around the World

It's very hard for just one country to put this tax in place because money moves so quickly across borders. If only one country had the tax, traders might just move their money through other countries without the tax. Because of this, many people think it would be best if a big international group, like the United Nations, managed the Tobin tax. This would also give the U.N. a lot of money to help countries in need, without relying on donations from individual countries.

Even so, some countries have tried to make plans for the tax on their own. In Europe, the Tobin tax was a big topic in 2001. On June 15, 2004, the finance committee in the Belgian Parliament approved a law to bring in a version of the Tobin tax called the Spahn tax. However, Belgium's law says they will only start using the tax once all the countries that use the euro currency also put a similar law in place.

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