The “Robin Hood tax” term was coined in Texas in 1993 for a property tax used to finance poor schools but it is now being attached to the levy on financial transactions first advocated by economist James Tobin in 1972. It was originally seen as a way to calm markets but fans of a Tobin tax saw it later as a way to fund international institutions such as the United Nations or World Bank, and now a source of finance for good causes.

The current campaign for the tax was initiated by former UK prime minister Gordon Brown when he hosted the G20 meeting in April 2009, and has been taken up by a high-profile group of charities including Greenpeace, Save The Children, Friends of the Earth and Christian Aid. Fronted by actors such as Sir Ben Kingsley and Bill Nighy it has exploited Facebook, YouTube and other modern media to gain support.

The campaigners say a 0.05 per cent levy on global transactions would raise $400bn a year.

Barbara Stocking, chief executive of the Oxfam charity, says: “A tiny tax on banks can make a huge difference for people around the globe forced into extreme poverty by the economic crisis. We have a once in a lifetime opportunity to make global finance work in the interests of people at home and abroad.”

Such a well of finance seems too good to be true. And according to the tax’s detractors, it is.

Madsen Pirie, president of the Adam Smith Institute, a UK think-tank, says any gain comes at a cost. “Taxes are always passed on to the customer. Banks will pass it on and ultimately it will fall on those with mortgages and loans, changing foreign currency or saving in insurance or pension funds.”   

While the Robin Hood campaigners have hundreds of economists supporting their argument, there are other economists equally vocal in their opposition. If $400bn is taken from banks, that is $400bn of smaller dividends, lower pay or higher fees, which is spending taken out of national economies, even if it is replaced by expenditure on good causes elsewhere.

Further, taxing troubled banks makes them weaker when they are being told by regulators to rebuild their capital. For lenders such as Royal Bank of Scotland, rescued by the UK government and still trading at a loss, a levy on transactions would only increase that annual deficit. And while 0.05 per cent may look small, it is more than the profit margin on some deals.

The levy’s advocates constantly emphasise that this is a tiny tax, yet $400bn a year is a lot. Indeed it is more than half the annual profits of the global banking system and more than the new capital subscribed by shareholders, governments and sovereign wealth funds since the start of the crisis.

Nor would a levy necessarily stabilise financial markets, say critics.

Neil McCulloch of the Institute of Development Studies says: “Proponents argue that by discouraging speculation such a tax would reduce volatility of prices and perhaps prevent crashes. Unfortunately the empirical evidence suggests there is a trade off: dampening speculation also removes liquidity, which can increase volatility. Sadly, painless taxes do not exist.”

Nevertheless, the Robin Hood lobby has kept a bank levy on the international agenda and made it an issue in Britain’s general election campaign. Both major parties included it in their agendas. Gordon Brown argued the tax must be global to avoid disadvantaging London, saying: “We do not want a race to the bottom, where different tax authorities compete with each other.” However, his opponent, new Prime Minister David Cameron, stated: “We are prepared to act unilaterally if necessary, but there is emerging international agreement on this approach.”

Indeed, while Brown’s proposal for a levy received a cool initial response, some sort of levy has gradually been accepted by European and US leaders, with the International Monetary Fund putting a plan to the April 2010 G20 meeting in Washington.

But the politicians’ arguments for a financial levy differ from the Robin Hood campaigners’. The G20 leaders believe a tax should recoup state aid – like US president Obama’s plan for a 0.15 per cent annual fee on big banks’ assets to recover the $90bn rescue aid – recapitalise the banking system or prevent another crash. The lobbyists seem more interested in spending the money than the effect of raising it – or see it as a punishment for greedy bankers.

Brendan Barber, head of Britain’s trade union movement, for instance, says: “The crash was made in the financial sector: finance should now make a proper contribution to putting right the damage caused and preventing huge cuts in vital public services.”

The Robin Hood campaigners’ website is even more blunt. “Who would you rather lost their job?” it asks. “A currency trader or a nurse?” Internet voters are 10 to one in favour of the tax but an independent poll puts support at 53 per cent.

But even if there is a consensus on taxing banks, the real argument could follow. With so many pressure groups waiting to spend that $400bn – from AIDS charities to wildlife groups – sharing the spoils may prove the real battlefield.