South Korean lawmakers proposed on Monday to adopt a so-called Tobin tax in a bid to reduce extreme volatilities in the foreign exchange market.

A total of 26 legislators, including 24 Democratic United Party lawmakers and two minor progressive party members, proposed the bill to introduce the Tobin tax that will levy a low rate in ordinary times on foreign exchange transactions, while imposing a super-high rate of 10-30 percent under the crisis.

The bill defined the crisis situation as volatility of over 3 percent in the dollar/won exchange rate compared with the previous session. Over the past 22 years, the dollar/won exchange rate showed the volatility breaching the 3 percent level only 36 times, meaning that the levy will not be burdensome for foreign exchange transactions except for the extreme volatilities in the foreign exchange market.

The lawmakers said at a joint press conference that the proposed bill was mainly aimed at stabilizing the foreign exchange market, whose instabilities under the crisis situation led to excessive industrial restructuring, higher jobless rate and souring domestic demand. They stressed that the bill did not aim to increase tax revenues.

The Tobin tax was suggested by Nobel Laureate economist James Tobin in 1972 one year after the Bretton Woods system collapsed. The tax was devised to reduce the exchange rate fluctuations by levying a small tax on all spot conversions of one currency into another.