Tax avoidance and evasion are forgotten but essential aspects of currency exchange taxes
Objectives:This theoretical paper describes the three fatal flaws of currency exchange taxation propositions such as the so-called Tobin tax on currency exchanges.
Data/Methods:
First, it argues that the Tobin tax can enjoy only temporary success in the areas of implementation and enforcement; after the initial period of success, this tax would wreak havoc on international currency exchanges. Second, it posits that just as any chess strategy, it will encourage counter-moves, both legal and illegal to minimize costs of compliance. Third, it will create a next generation of tax scoff-laws; these scofflaws will fall into categories both legal [tax avoidance] and illegal [tax evasion]. Finally, this theoretical paper concludes that where taxation on currency exchange is embraced, there will be skimming operations, tax avoidance and tax evasion. Each of these three fatal flaws will be demonstrated by historic and current examples from domestic and foreign taxation schemas. The author will show the unintended consequences of tax penalties and tax havens which generate short term behaviors that lead or have led to immoral or irresponsible macro-economic behaviors.
Results/Expected Results:
The author concludes that this type of tax, which is meant to ensure stability, predictability and punish speculation, cannot achieve any long-term benefit except to force a uni-cultural exchange currency. This outcome appears counterintuitive in the face of the currently struggling EURO currency. Thus, a Tobin tax must be viewed as a metaphoric curse of “joint and several liability” that is the fatal flaw of any partnership.