What is the Tobin Tax? It was put forward in 1972 by the Nobel-prize winning American economist James Tobin. Originally he suggested a tax on all payments from one currency to another. His aim was to curb massive and destabilising movements of funds between foreign currency exchanges. The cash raised would be used as aid for developing countries. The idea has since been extended to cover a tax on all share, bond and currency transactions. How would it work? Tobin said it had to to be an internationally-agreed uniform tax to work effectively. Each government would levy it with the proceeds paid into a global financial body such as the World Bank or the International Monetary Fund. Critics said it would be impractical: A high rate would undermine financial markets, a too low rate and it would not achieve its aim. It has also proved impossible to get global agreement to introduce it. How much would it cost? Tobin suggested a rate of 0.5pc but other economists have put forward rates ranging from 0.1pc to 1pc. Even at a very low rate, supporters argue that if it were imposed on all financial transactions across the world it could raise billions of pounds. Does it have widespread support? The tax has some high profile supporters, including the former Labour Prime Minister Gordon Brown and the French president Nicolas Sarkozy. In 2009 the wake of the economic crash the two leaders said the tax could ensure that banks did not take excessive risks that could lead to another financial crisis. They urged the IMF to consider it but it was opposed by the US and did not proceed. What are the advantages and disadvantages of the tax? Some economists support a Tobin tax as a way of helping developing economies. They say in the 1990s it could have prevented countries such as Russia, Mexico and those in South East Asia having to raise their interest rates to very high levels as their currencies came under threat from speculators. But critics say there has never been universal support for a Tobin tax and while it might reduce the volume of foreign-exchange transactions, it would not necessarily reduce the volatility of currencies. Has a Tobin tax been tried anywhere? A version of it was tried in Sweden in 1984 where a 0.5pc tax was introduced on the buying and selling of shares. The results were disappointing. It had been hoped that about 1.5bn Swedish kronor (£142m) per year would be raised. On average 50m kronor was raised. Capital gains tax revenues also fell. But the impact on market trading was also more dramatic. During the first week of the tax, the volume of bond trading fell by 85pc. In 1991 the tax was scrapped.