Tobin tax and global health financing: Learning from Brazilian experience

Recent proposals for the Tobin tax have been dominated by revenue perspective, based on the assumption that an international agreement could be reached to levy a tax on financial transactions, the resulting revenue been divided among poor countries. Microeconomic reasoning on a Tobin tax reflects the concern about risks imposed on firms and individuals by the financial markets. Also, financial market drain resources from productive sectors, as it generates profits far much superior than economic benefits from real sector. Financial markets control over macroeconomic policy may have a negative impact on microeconomic and social policy, distorting the impact of government policies such as redistributive taxation and welfare policies. It is somehow expected that the Tobin tax would reduce the volume of financial transactions, limiting the role of the financial sector. Last but not least, a Tobin tax is a potential source of revenue for government and international institutions. Estimates suggest that the volume of financial transactions is between 10 and 100 times that of real transactions, so that the tax may raise significant revenue.   The paper assesses Brazilian experience on a "Tobin like" national tax on financial transactions, which went on for over twelve years, with positive revenue impact on public health financing in midst of a recurrent debate on virtues of this taxation. Finally, tax was extinguished by Congress act, due to increases of tax burden by government, in spite of positive impact on health financing. In spite of world financial crisis, paper sustains that there is still room for a Tobin Tax as an effective means for financing public health improvement in poor countries, estimates potential revenue as compared to other sources and examines equity effects of such a tax Key words Global Health Financing, Tobin Tax, Revenue Redistribution