March 25, 1999
Ottawa -- MPs from all parties, including Finance Minister Paul Martin, have supported introduction of a new tax on all transactions in international financial markets. But the various supporters of a motion urging the so-called Tobin tax have different reasons for voting the way they did. And nobody expects the international community to support such a tax soon.
The small tax, first advocated by American Nobel-winning economist James Tobin, would be applied to every international financial market transaction to slow such things as currency speculation and capital flight from weak economies.
Another application for the tax would be to raise money for international projects such as environmental cleanup or Third World development.
The Commons voted Tuesday 164-83 in a support of a motion by New Democrat Lorne Nystrom that Ottawa should enact the tax in concert with the international community. Nystrom said Wednesday the next step is for Martin to get the tax on the agenda at international forums like the G-7.
He also credited Martin, whom he met before the vote, with being critical to the success of the resolution. ''I believe if Mr. Martin didn't want this to happen he would have made sure that it would not happen.'' Nystrom added that with the influence of nation states declining in a globalized world, some sort of mechanism is needed to raise money for international projects.
Based on financial market activity in 1995, a Tobin tax of 0.1 per cent on trading transactions would have raised $175 billion US.
Martin, who first raised the Tobin tax at the G7 in 1995, said he agrees the tax would be a good international fund-raiser and for that reason should be discussed. ''It would enable many countries such as Canada to actually lower taxes if a large vehicle for large international requirements were found.''
He said such a tax would be a poor way to control the flow of hot money because if the tax were as small as many people say it would be it would not be effective in discouraging speculation. If it were large enough to discourage speculation it likely would have counter-productive side effects, Martin added.
The Tobin tax is opposed by the U.S., Germany and Britain as well as most of the international financial community, which hates the idea. All agree that to be effective the tax would have to be jointly implemented by all major industrialized countries and, as the finance minister noted, that unanimity simply isn't available.
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