IDEAS home Printed from https://ideas.repec.org/a/bla/jcmkts/v52y2014i2p234-249.html
   My bibliography  Save this article

The European Commission's Proposal for a Financial Transactions Tax: A Critical Assessment

Author

Listed:
  • John Grahl
  • Photis Lysandrou

Abstract

A financial activities tax (FAT) and a financial transactions tax (FTT) are the main alternative ways of recouping some of the public money used to bail out the financial sector after the great crisis of 2007–08. In preparing a common proposal for the European Union, the European Commission initially appeared to favour the FAT, but then swung its weight behind the FTT in late 2011. Its rationale was that in addition to generating revenue, this tax could also help to stabilize the financial markets by curbing excessive speculative trading. This article takes a different position. Its central argument is that the FTT would amplify rather than dampen market instability by interfering with the functions of important financial institutions. Its chief conclusion is that the FAT is superior to the FTT.

Suggested Citation

  • John Grahl & Photis Lysandrou, 2014. "The European Commission's Proposal for a Financial Transactions Tax: A Critical Assessment," Journal of Common Market Studies, Wiley Blackwell, vol. 52(2), pages 234-249, March.
    • Handle: RePEc:bla:jcmkts:v:52:y:2014:i:2:p:234-249
    DOI: 10.1111/jcms.12086
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/jcms.12086
    Download Restriction: no
    File URL: https://libkey.io/10.1111/jcms.12086?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Stephan Schulmeister, 2011. "Implementation of a General Financial Transactions Tax," WIFO Studies, WIFO, number 41992, April.
    2. Grossman, Sanford J & Stiglitz, Joseph E, 1980. "On the Impossibility of Informationally Efficient Markets," American Economic Review, American Economic Association, vol. 70(3), pages 393-408, June.
    3. Milgrom, Paul & Stokey, Nancy, 1982. "Information, trade and common knowledge," Journal of Economic Theory, Elsevier, vol. 26(1), pages 17-27, February.
    4. European Commission, 2010. "Innovative Financing at a Global Level," Taxation Papers 23, Directorate General Taxation and Customs Union, European Commission.
    5. John Grahl, 2003. "Sand in the wheels or spanner in the works? The Tobin tax and global finance," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 27(4), pages 597-621, July.
    6. John Vella & Clemens Fuest & Tim Schmidt-Eisenlohr, 2011. "The EU Commission's Proposal for a Financial Transaction Tax," Working Papers 1117, Oxford University Centre for Business Taxation.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Photis Lysandrou, 2016. "The colonization of the future: An alternative view of financialization and its portents," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 39(4), pages 444-472, October.
    2. Annina Kaltenbrunner & Photis Lysandrou, 2017. "The US Dollar's Continuing Hegemony as an International Currency: A Double-matrix Analysis," Development and Change, International Institute of Social Studies, vol. 48(4), pages 663-691, July.
    3. Bratis, Theodoros & Laopodis, Nikiforos T. & Kouretas, Georgios P., 2017. "Assessing the impact of an EU financial transactions tax on asset volatility: An event study," International Review of Financial Analysis, Elsevier, vol. 53(C), pages 12-24.
    4. Lisa Kastner, 2017. "Business lobbying under salience," Post-Print hal-02187871, HAL.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stephan Schulmeister, 2014. "A General Financial Transactions Tax. Motives, Effects and Implementation According to the Proposal of the European Commission," WIFO Working Papers 461, WIFO.
    2. De Long, J Bradford & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1990. "Noise Trader Risk in Financial Markets," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 703-738, August.
    3. J. Doyne Farmer, 2002. "Market force, ecology and evolution," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 11(5), pages 895-953, November.
    4. He, Hua & Wang, Jiang, 1995. "Differential Information and Dynamic Behavior of Stock Trading Volume," The Review of Financial Studies, Society for Financial Studies, vol. 8(4), pages 919-972.
    5. Subrahmanyam, Avanidhar, 2009. "Optimal financial education," Review of Financial Economics, Elsevier, vol. 18(1), pages 1-9, January.
    6. Vladimir Asriyan, 2014. "Balance sheet recessions with informational and trading frictions," Economics Working Papers 1463, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2018.
    7. Jiao, Peiran & Veiga, André & Walther, Ansgar, 2020. "Social media, news media and the stock market," Journal of Economic Behavior & Organization, Elsevier, vol. 176(C), pages 63-90.
    8. Naik, Narayan Y., 1997. "Multi-period information markets," Journal of Economic Dynamics and Control, Elsevier, vol. 21(7), pages 1229-1258, June.
    9. James Peck & Matthew O. Jackson, 1999. "Asymmetric information in a competitive market game: Reexamining the implications of rational expectations," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 13(3), pages 603-628.
    10. Zurita, Felipe, 2004. "On the limits to speculation in centralized versus decentralized market regimes," Journal of Financial Intermediation, Elsevier, vol. 13(3), pages 378-408, July.
    11. Mirza Faizan Ahmed, 2019. "Estimating proportion of noise traders and asset prices," Business Review, School of Economics and Social Sciences, IBA Karachi, vol. 14(2), pages 1-12, July-Dece.
    12. Estrada, Javier, 1994. "Insider trading: regulation, securities markets, and welfare under risk neutrality," UC3M Working papers. Economics 2922, Universidad Carlos III de Madrid. Departamento de Economía.
    13. N. Serhan Aydin, 2016. "Time value of extra information against its timely value," Papers 1610.04051, arXiv.org.
    14. Edward Halim & Yohanes E. Riyanto & Nilanjan Roy, 2019. "Costly Information Acquisition, Social Networks, and Asset Prices: Experimental Evidence," Journal of Finance, American Finance Association, vol. 74(4), pages 1975-2010, August.
    15. Cujean, Julien & Andrei, Daniel & Fournier, Mathieu, 2019. "The Low-Minus-High Portfolio and the Factor Zoo," CEPR Discussion Papers 14153, C.E.P.R. Discussion Papers.
    16. Stephan Schulmeister, 2015. "The struggle over the Financial Transactions Tax. A politico-economic farce," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(5), pages 15-55.
    17. Markus Glaser & Martin Weber, 2007. "Overconfidence and trading volume," The Geneva Papers on Risk and Insurance Theory, Springer;International Association for the Study of Insurance Economics (The Geneva Association), vol. 32(1), pages 1-36, June.
    18. Gadi Barlevy, 2015. "Bubbles and Fools," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II.
    19. Verrecchia, Robert E., 2001. "Essays on disclosure," Journal of Accounting and Economics, Elsevier, vol. 32(1-3), pages 97-180, December.
    20. Philip Bond & Hulya Eraslan, 2007. "Information-based trade," Levine's Bibliography 122247000000001689, UCLA Department of Economics.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jcmkts:v:52:y:2014:i:2:p:234-249. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0021-9886 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.