Tobin Tax is applicable on which of the following?

Solution

Tobin tax is a tax on international flow of short term capital. The tax is known after economist James Tobin who proposed it in1972 in the form a currency transaction tax. Basically, Tobin tax aims to discourage volatile short term capital flows or hot money which are very speculative . The burden of a Tobin tax is inversely proportional to the length of the transaction, i.e., the shorter the holding period, the heavier the burden of tax.   Variants of Tobin tax are imposed by many countries to discourage short term capital flows or hot money. In India, the Securities Transaction Tax (STT) can be considered as a type of Tobin tax.