Spahn tax: Difference between revisions
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| ⚫ | A '''Spahn tax''' is a type of [[currency transaction tax]] that is meant to be used for the purpose of controlling exchange-rate volatility. This idea was proposed by [[Paul Bernd Spahn]] in 1995.<ref name = "Spahn">{{cite web |url=http://www.wiwi.uni-frankfurt.de/profs/spahn/pdf/publ/7-041.pdf |title=International Financial Flows and Transactions Taxes: Survey and Options |author=[[Paul Bernd Spahn]] |date= June 16, 1995 |
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{{See also|Tobin tax|Currency transaction tax|Financial transaction tax}} |
{{See also|Tobin tax|Currency transaction tax|Financial transaction tax}} |
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{{Taxation|expanded=International}} |
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{{short description|Type of currency transaction tax}} |
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| ⚫ | A '''Spahn tax''' is a type of [[currency transaction tax]] that is meant to be used for the purpose of controlling exchange-rate volatility. This idea was proposed by [[Paul Bernd Spahn]] in 1995.<ref name = "Spahn">{{cite web |url=http://www.wiwi.uni-frankfurt.de/profs/spahn/pdf/publ/7-041.pdf |title=International Financial Flows and Transactions Taxes: Survey and Options |author=[[Paul Bernd Spahn]] |date= June 16, 1995|publisher= University of Frankfurt/Main; Paper originally published with the [[International Monetary Fund]] (IMF) as Working Paper WP/95/60.|access-date=2010-01-13}}</ref> |
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==Early history== |
==Early history== |
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The initial idea for a transaction tax |
The initial idea for a [[currency transaction tax]] is attributed to [[James Tobin]] in 1972,<ref>{{cite journal |url=http://ideas.repec.org/a/eej/eeconj/v4y1978i3-4p153-159.html |title=A Proposal for International Monetary Reform |author=James Tobin |date=July–October 1978 |journal=Eastern Economic Journal|volume=4 |issue=3–4 |publisher=Eastern Economic Association |pages=153–159|access-date=2010-01-31}}</ref> a concept now known as a [[Tobin tax]]. On 16 June 1995 Spahn, in his analysis of the original idea, concluded that the concept was not viable and suggested an alternative solution to the problem of managing exchange-rate volatility.<ref name = "Spahn"/> |
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==Concept== |
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According to |
According to Spahn, "Analysis has shown that the Tobin tax as originally proposed is not viable and should be laid aside for good." Furthermore, he believes that "it is virtually impossible to distinguish between normal liquidity trading and speculative 'noise' trading. If the tax is generally applied at high rates, it will severely impair financial operations and create international liquidity problems, especially if derivatives are taxed as well. A lower tax rate would reduce the negative impact on financial markets, but not mitigate speculation where expectations of an exchange rate change exceed the tax margin."<ref name="Spahn"/> |
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In 1995, Spahn suggested an alternative involving "a two-tier rate structure consisting of a low-rate financial transactions tax, plus an exchange surcharge at prohibitive rates as a piggyback. The latter would be dormant in times of normal financial activities, and be activated only in the case of speculative attacks. The mechanism allowing the identification of abnormal trading in world financial markets would make reference to a |
In 1995, Spahn suggested an alternative, involving "a two-tier rate structure consisting of a low-rate financial transactions tax, plus an exchange surcharge at prohibitive rates as a piggyback. The latter would be dormant in times of normal financial activities, and be activated only in the case of speculative attacks. The mechanism allowing the identification of abnormal trading in world financial markets would make reference to a 'crawling peg' with an appropriate exchange rate band. The exchange rate would move freely within this band without transactions being taxed. Only transactions effected at exchange rates outside the permissible range would become subject to tax. This would automatically induce stabilizing behavior on the part of market participants."<ref name = "Spahn"/> |
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==Proposals== |
==Proposals== |
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On June |
On 15 June 2004 the [[Belgium|Belgian]] Parliament approved a bill implementing a Spahn tax.<ref>{{cite web |url=http://www.taxation.be/pdf/t039.pdf |title=Belgium Supports Tobin Tax |author=Marc Quaghebeur |date=November 29, 2004 |work=Tax Notes International|pages=727–729}}</ref> According to the legislation, [[Belgium]] will introduce the Spahn tax once all countries of the [[eurozone]] introduce a similar law.<ref name = "ECB">[[European Central Bank|ECB]] (2004). [http://www.ecb.int/ecb/legal/pdf/en_con_2004_34_f_sign.pdf Opinion of the European Central Bank (CON/2004/34)]</ref> |
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In November 2004, Belgium submitted this law for an opinion to the [[European Central Bank]] |
In November 2004, Belgium submitted this law for an opinion to the [[European Central Bank]], which provided both an economic and legal assessment. Its summary stated: |
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<blockquote>"...the ECB concludes that the economic and monetary usefulness of a tax, such as envisaged by the draft law, is highly questionable, given the uncertainty of its claimed benefits and the likely welfare costs arising from distortions in the working of financial markets. This assessment is reinforced by the difficulties expected with respect to its implementation."<ref name = "ECB"/></blockquote> |
<blockquote>"...the ECB concludes that the economic and monetary usefulness of a tax, such as envisaged by the draft law, is highly questionable, given the uncertainty of its claimed benefits and the likely welfare costs arising from distortions in the working of financial markets. This assessment is reinforced by the difficulties expected with respect to its implementation."<ref name = "ECB"/></blockquote> |
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It continued: |
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The summary of their legal assessment was: |
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<blockquote>"...the ECB is of the opinion that the introduction by a euro area Member State of a tax, such as envisaged by the draft law, is incompatible with the [[ |
<blockquote>"...the ECB is of the opinion that the introduction by a euro area Member State of a tax, such as envisaged by the draft law, is incompatible with the [[Maastricht Treaty|Treaty]]."<ref name = "ECB"/></blockquote> |
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In July 2005 former Austrian chancellor [[Wolfgang Schüssel]] called for a European Union Tobin tax to base the communities' financial structure on more stable and independent grounds. However, the proposal was rejected by the [[European Commission]].{{Citation needed|date=February 2010}} |
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==See also== |
==See also== |
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{{div col|colwidth=22em}} |
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{{Multicol}} |
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* [[Bank for International Settlements]] |
* [[Bank for International Settlements]] |
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* [[ |
* [[Central bank#Currency issuance|Central banks - which issue currency]] |
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* [[Credit crunch]] |
* [[Credit crunch]] |
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* [[Currencies]] |
* [[Currencies]] |
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* [[Financial markets]] |
* [[Financial markets]] |
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* [[Financial transaction tax]] |
* [[Financial transaction tax]] |
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* [[ |
* [[Exchange rate#Fluctuations in exchange rates|Fluctuation in exchange rates]] |
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* [[Foreign exchange controls]] |
* [[Foreign exchange controls]] |
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* [[Foreign exchange derivative]] |
* [[Foreign exchange derivative]] |
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* [[Money market]] |
* [[Money market]] |
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* [[Noise (economic)]] |
* [[Noise (economic)]] |
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{{Multicol-break}} |
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* [[Paul Bernd Spahn]] |
* [[Paul Bernd Spahn]] |
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* [[Speculation]] |
* [[Speculation]] |
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* [[Speculative attack]] |
* [[Speculative attack]] |
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* [[ |
* [[Foreign exchange market#Speculation|Speculation in foreign exchange markets]] |
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* [[Spot market]] |
* [[Spot market]] |
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* [[Sudden stop (economics)]] |
* [[Sudden stop (economics)]] |
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* [[Volatility (finance)]] |
* [[Volatility (finance)]] |
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* [[Volatility risk]] |
* [[Volatility risk]] |
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* [[ |
* [[Volatility risk#Consequences of currency volatility|Consequences of currency volatility]] |
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{{div col end}} |
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===Related economic crises=== |
===Related economic crises=== |
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{{div col|colwidth=27em}} |
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* [[1994 economic crisis in Mexico]] |
* [[1994 economic crisis in Mexico]] |
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* [[1997 Asian Financial Crisis]] |
* [[1997 Asian Financial Crisis]] |
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* [[Argentine economic crisis (1999–2002)]] |
* [[Argentine economic crisis (1999–2002)]] |
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* [[Financial crisis of 2007–2010]] |
* [[Financial crisis of 2007–2010]] |
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{{ |
{{div col end}} |
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==References== |
==References== |
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==External links== |
==External links== |
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* [http://www.globalpolicy.org/socecon/glotax/currtax/index.htm Currency Transaction Taxes - Library of links to legislation, proposals, reports, articles and archives - from Global Policy Forum] |
* [http://www.globalpolicy.org/socecon/glotax/currtax/index.htm Currency Transaction Taxes - Library of links to legislation, proposals, reports, articles and archives - from Global Policy Forum] |
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{{DEFAULTSORT:Spahn Tax}} |
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[[Category: |
[[Category:Foreign exchange market]] |
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| ⚫ | |||
[[Category:International taxation]] |
[[Category:International taxation]] |
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Latest revision as of 15:45, 29 April 2023
| Part of a series on |
| Taxation |
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| An aspect of fiscal policy |
A Spahn tax is a type of currency transaction tax that is meant to be used for the purpose of controlling exchange-rate volatility. This idea was proposed by Paul Bernd Spahn in 1995.[1]
Early history
[edit]The initial idea for a currency transaction tax is attributed to James Tobin in 1972,[2] a concept now known as a Tobin tax. On 16 June 1995 Spahn, in his analysis of the original idea, concluded that the concept was not viable and suggested an alternative solution to the problem of managing exchange-rate volatility.[1]
Concept
[edit]According to Spahn, "Analysis has shown that the Tobin tax as originally proposed is not viable and should be laid aside for good." Furthermore, he believes that "it is virtually impossible to distinguish between normal liquidity trading and speculative 'noise' trading. If the tax is generally applied at high rates, it will severely impair financial operations and create international liquidity problems, especially if derivatives are taxed as well. A lower tax rate would reduce the negative impact on financial markets, but not mitigate speculation where expectations of an exchange rate change exceed the tax margin."[1]
In 1995, Spahn suggested an alternative, involving "a two-tier rate structure consisting of a low-rate financial transactions tax, plus an exchange surcharge at prohibitive rates as a piggyback. The latter would be dormant in times of normal financial activities, and be activated only in the case of speculative attacks. The mechanism allowing the identification of abnormal trading in world financial markets would make reference to a 'crawling peg' with an appropriate exchange rate band. The exchange rate would move freely within this band without transactions being taxed. Only transactions effected at exchange rates outside the permissible range would become subject to tax. This would automatically induce stabilizing behavior on the part of market participants."[1]
Proposals
[edit]On 15 June 2004 the Belgian Parliament approved a bill implementing a Spahn tax.[3] According to the legislation, Belgium will introduce the Spahn tax once all countries of the eurozone introduce a similar law.[4]
In November 2004, Belgium submitted this law for an opinion to the European Central Bank, which provided both an economic and legal assessment. Its summary stated:
"...the ECB concludes that the economic and monetary usefulness of a tax, such as envisaged by the draft law, is highly questionable, given the uncertainty of its claimed benefits and the likely welfare costs arising from distortions in the working of financial markets. This assessment is reinforced by the difficulties expected with respect to its implementation."[4]
It continued:
"...the ECB is of the opinion that the introduction by a euro area Member State of a tax, such as envisaged by the draft law, is incompatible with the Treaty."[4]
See also
[edit]- Bank for International Settlements
- Central banks - which issue currency
- Credit crunch
- Currencies
- Currency crisis
- Currency transaction tax
- Exorbitant privilege
- Financial markets
- Financial transaction tax
- Fluctuation in exchange rates
- Foreign exchange controls
- Foreign exchange derivative
- Foreign exchange market
- Liquidity crisis
- Money market
- Noise (economic)
- Paul Bernd Spahn
- Speculation
- Speculative attack
- Speculation in foreign exchange markets
- Spot market
- Sudden stop (economics)
- Tobin tax
- Transfer tax
- Volatility (finance)
- Volatility risk
- Consequences of currency volatility
Related economic crises
[edit]References
[edit]- ^ a b c d Paul Bernd Spahn (June 16, 1995). "International Financial Flows and Transactions Taxes: Survey and Options" (PDF). University of Frankfurt/Main; Paper originally published with the International Monetary Fund (IMF) as Working Paper WP/95/60. Retrieved 2010-01-13.
- ^ James Tobin (July–October 1978). "A Proposal for International Monetary Reform". Eastern Economic Journal. 4 (3–4). Eastern Economic Association: 153–159. Retrieved 2010-01-31.
- ^ Marc Quaghebeur (November 29, 2004). "Belgium Supports Tobin Tax" (PDF). Tax Notes International. pp. 727–729.
- ^ a b c ECB (2004). Opinion of the European Central Bank (CON/2004/34)