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Taxation for the 21st century: the automated payment transaction (APT) tax

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  • Edgar L. Feige

Abstract

This paper examines the desirability and feasibility of replacing the present system of personal and corporate income, sales, excise, capital gains, import and export duties, gift and estate taxes with a single comprehensive revenue neutral Automated Payment Transaction (APT) tax. In its simplest form, the APT tax consists of a flat tax levied on all transactions. The tax is automatically assessed and collected when transactions are settled through the electronic technology of the banking/ payments system. The APT tax introduces progressivity through the tax base since the volume of final payments includes exchanges of titles to property and is therefore more highly skewed than the conventional income or consumption tax base. The wealthy carry out a disproportionate share of total transactions and therefore bear a disproportionate burden of the tax despite its flat rate structure. The automated recording of all APT tax payments by firms and individuals creates a degree of transparency and perceived fairness that induces greater tax compliance. Also, the tax has lower administrative and compliance cost. Like all taxes, the APT tax creates new distortions whose costs must be weighted against the benefits obtained by replacing the current tax system. ---Edgar L. Feige

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Bibliographic Info

Article provided by CEPR & CES & MSH in its journal Economic Policy.

Volume (Year): 15 (2000)
Issue (Month): 31 (October)
Pages: 473-511

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Handle: RePEc:bla:ecpoli:v:15:y:2000:i:31:p:473-511

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Cited by:
  1. Cintra, Marcos, 2009. "Tax paradigms, globalization, and the electronic revolution," Textos para discussão 238, Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
  2. Pedro Albuquerque, 2006. "BAD taxation: Disintermediation and illiquidity in a bank account debits tax model," International Tax and Public Finance, Springer, vol. 13(5), pages 601-624, September.
  3. Patrick Honohan, 2003. "Alternative Approaches to Taxing the Financial Sector: Which is Best and Where Does Chile Stand?," Working Papers Central Bank of Chile 225, Central Bank of Chile.

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