Finance policy
The currency transaction tax. A bold idea for financing development.
A bold solution to financing for development
Authors:
; The North-South Institute
Publisher:
North-South Institute , 2008
Global problems require bold solutions and the Currency Transaction Tax (CTT) is one such idea. It proposes a small levy on foreign exchange transactions and uses the money raised to finance development projects for the global public good.
The idea of CTT is to be a tax on the benefits of globalisation. The authors claim the tax would be easy to operate and difficult to evade since all foreign exchange transactions are completed in a few large centralised settlement structures. They estimated that a CTT of 0.005 per cent on each transaction in major currencies would yield approximately US$ 33 billion without disrupting foreign currency markets. The money would be allocated for development and administered multilaterally.
Critics of the Tobin Tax, a similar idea, say this tax will reduce foreign currency transactions and create inefficiencies in the trading markets. However the Tobin Tax would have been deliberately set to a higher level to affect market behaviour. The CTT is intended to raise money without disrupting the market.
