A Tobin tax is the suggested tax on all trade of currency across borders. Named after the economist James Tobin, the tax is intended to put a penalty on short-term speculation in currencies. The original tax rate he proposed was 1%, which was subsequently lowered to between 0.1% and 0.25%. hey can be enacted by national legislatures, followed by multilateral cooperation for effective enforcement. The revenue should go to global priorities: basic environmental and human needs. Such taxes will help tame currency market volatility and restore national economic sovereignty.
Tobin tax is a tool for politician to limit the short term effects of bad monetary policy within a country, for example by being able to limiting currency speculation and at the same time have a policy that otherwise would drive down the value of the currency, in effect using the Tobin tax as a form of foreign exchange control. For global policymakers it is a tool to enforce consolidation of power and unification of the world by limiting free flow of capital.
Opinions are divided between those who applaud that the Tobin tax could protect countries from spillovers of financial crises, and those who claim that the tax would also constrain the effectiveness of the global economic system and dry up world liquidity. Support for the Tobin tax has come from the multi-billionaire speculator George Soros, who stated that, while the tax goes against his personal interests, he thinks that its introduction could have positive effects on the world economy. However, he advocates a variation to the Tobin tax: Special Drawing Rights or SDRs that the rich countries would pledge for the purpose of providing international assistance.