The “Spahn tax” is a proposal for a tax on financial transactions, named after the German economist and politician Friedrich Wilhelm Spahn. It is a type of currency transaction tax that is intended to be used to control exchange rate volatility. The basic idea behind the Spahn tax is to impose a small tax on all financial transactions, such as buying and selling stocks, bonds, and other financial instruments. The revenue generated by the tax would then be used to fund public services or reduce government debt. Paul Bernd Spahn proposed this concept in 1995.
Early history
In 1972, James Tobin proposed the first currency transaction tax, which became known as the Tobin tax. On the 16th of June, 1995. In his analysis of the original concept, Spahn concluded that it was unviable and proposed an alternative solution to the problem of managing exchange-rate volatility.
The Spahn tax has been proposed as a way to reduce financial speculation and stabilize financial markets. By making it slightly more expensive to engage in short-term trading and speculation, the tax would discourage this kind of behavior and encourage longer-term investment.
Concept
“Analysis has shown that the Tobin tax as originally proposed is not viable and should be abandoned,” says Spahn. In addition, he believes, “It is nearly impossible to tell the difference between normal liquidity trading and speculative ‘noise’ trading. If the tax is applied at high rates in general, it will severely impede financial operations and cause international liquidity problems, especially if derivatives are taxed as well. A lower tax rate would mitigate the negative impact on financial markets, but it would not mitigate speculation in cases where the expected exchange rate change exceeds the tax margin.”
Supporters of the Spahn tax argue that it would not only raise revenue for government services, but also help prevent financial bubbles and crashes by discouraging risky trading practices. However, opponents argue that the tax would decrease market liquidity, raise trading costs, and potentially harm economic growth.
While the Spahn tax has not been widely implemented, similar taxes have been adopted in some countries. For example, France implemented a financial transaction tax in 2012, although it has since been modified and reduced in scope.
