Have your say: Should we tax financial transactions or currency trades?

New Zealand's largest fishing company Sanford has called for a tax on foreign exchange transactions that aren't related to trade, arguing New Zealand's currency is distorted by foreign exchange traders. Sanford Managing Director Eric Barratt told shareholders at the group's annual meeting yesterday that it was time the government started making money from all the foreign exchange traders. Barratt's comments follow similar calls from Progressive Party leader Jim Anderton for a tax on financial transactions and moves by British Prime Minister Gordon Brown and some other countries to impose a so-called Tobin Tax on financial transactions Here are Barratt's comments in his annual address.

The crystal ball that can predict future exchange rates has yet to be invented and will never be when our exchange rate is not determined by the fundamental economics of New Zealand as a country compared to other countries currencies but by currency traders looking for safe havens to park large sums of money for usually very short periods. A very small proportion of trades in New Zealand dollars are related to the basic trading in international goods and services. It is high time New Zealand as a country started earning some income from these currency traders that costs shareholders in Sanford and other trading companies many millions of dollars each year. A tax on non trade related currency transactions could not only earn significant income for the government it could also result in our exchange rate moving closer to its realistic value and thereby add significant value to the wealth of New Zealanders.

My View It's true that New Zealand currency trading is way out of proportion to the underlying trade we do as a nation. We're regularly in the world's Top 10 most traded currencies, largely because there are so few freely traded currencies globally and we're one of the few. We also have a transparent market and are seen as a something of a proxy for trading a currency linked to soft commodities such as meat, dairy and fish. I like the idea of a Tobin Tax, but in practice it won't work unless you can get everyone charging it. The Americans won't so it will never happen. Barratt's idea of a tax on foreign exchange transactions that aren't linked to real trade flows sounds like a nightmare to police. Who knows what is a 'real' trade and what isn't a 'real' trade. I believe we're better off fixing the fundamentals such as our tax system, government spending and supply side issues such as labour and land than fiddling with currency controls like this. Your view? We welcome your comments and insights in the comments below