Debate has raged over the feasibility of a global financial transaction tax since it was first mooted by the US economist James Tobin in the early 1970s. Among the objections are:

Markets would find a way round it

This would be the case if the G20 imposed a blanket tax on all transactions without the support of the US, because business would simply migrate to New York. The foreign exchange market would offer the possibility of a go-it-alone or regional approach, as all trades are logged by central banks. It would be feasible for the European Central Bank to operate a currency levy within the euro area.

Banks could use offshore centres

Experts accept this would be a problem if a transaction tax were levied at the 1% rate initially proposed by Tobin. At lower rates, however, financial institutions would have to decide whether the cost and reputational risk of avoiding the tax would be worth it. Julian Jessop, chief international economist at Capital Economics, said: “The level of the tax is important: it has to be high enough to achieve its aims, while at the same time low enough that it would not be worth moving to a more exotic location to avoid having to pay. This challenge is not impossible, but clearly difficult.”