What is Tobin Tax - Indian Economy UPSC notes

The Tobin Tax is a small tax proposed by economist James Tobin, applied to international financial transactions, particularly currency exchanges. Its primary aim is to reduce excessive short-term speculative trading, which can cause instability in global economies. Key Points: Purpose : The tax aims to discourage volatile and short-term currency speculation that destabilizes economies, making such trades less attractive by imposing a small tax. Global Economic Stability : By taxing financial transactions, it helps to reduce volatility in global markets and prevent financial crises, especially in developing countries vulnerable to currency fluctuations. Revenue Generation : The tax generates revenue that could be used for global public goods like poverty reduction, climate change mitigation, or health initiatives. Rate : Typically a small tax rate, around 0.1% to 0.25% on currency trades, but due to the volume of transactions, the total revenue could be significant. Applications for UPSC Mains: …