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International Experiences with Securities Transaction Taxes

In: The Internationalization of Equity Markets

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  • John Y. Campbell
  • Kenneth A. Froot

Abstract

This paper studies the international experience with securities transaction taxes (STTs), using the Swedish and British systems as case studies. We argue that STTs are best thought of as taxes on different resources used in transactions: domestic brokerage services in the case of Sweden, and registration services in the British case. STTs give investors incentives to economize on the taxed resources by shifting trading to foreign markets or untaxed assets, or by reducing the volume of trade. We show that these effects can be important. Estimated revenues from an STT will be correspondingly overstated if they ignore such behavioral effects.

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This chapter was published in:

  • Jeffrey A. Frankel, 1994. "The Internationalization of Equity Markets," NBER Books, National Bureau of Economic Research, Inc, number fran94-1, Ekim.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 6276.

    Handle: RePEc:nbr:nberch:6276

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    References

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    1. Kenneth A. Froot & David S. Scharfstein & Jeremy C. Stein, 1990. "Herd on the Street: Informational Inefficiencies in a Market with Short-Term Speculation," NBER Working Papers 3250, National Bureau of Economic Research, Inc.
    2. Stiglitz, J.E., 1989. "Using Tax Policy To Curb Speculative Short-Term Trading," Papers, Columbia - Center for Futures Markets t2, Columbia - Center for Futures Markets.
    3. Kenneth A. Froot & Andre F. Perold & Jeremy C. Stein, 1991. "Shareholder Trading Practices and Corporate Investment Horizons," NBER Working Papers 3638, National Bureau of Economic Research, Inc.
    4. Summers, L.H. & Summers, V.P., 1989. "When Financial Markets Work Too Well : A Cautious Case For A Securities Transactions Tax," Papers, Columbia - Center for Futures Markets t12, Columbia - Center for Futures Markets.
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    Cited by:
    1. Edgar L. Feige, 2001. "Taxation for the 21st Century: The Automated Payment Transaction (APT) Tax," Public Economics, EconWPA 0106001, EconWPA.
    2. Gehrig, Thomas, 1998. "Competing markets," European Economic Review, Elsevier, vol. 42(2), pages 277-310, February.
    3. Sinha, Pankaj & Mathur, Kritika, 2012. "Evolution of security transaction tax in India," MPRA Paper 40165, University Library of Munich, Germany.
    4. John Brondolo, 2011. "Taxing Financial Transactions," IMF Working Papers 11/185, International Monetary Fund.
    5. Lensberg, Terje & Schenk-Hoppé, Klaus Reiner & Ladley, Dan, 2012. "Costs and Benefits of Speculation," Discussion Papers 2012/12, Department of Business and Management Science, Norwegian School of Economics.
    6. Copenhagen Economics, 2011. "Elasticities of Financial Instruments, Profits and Remuneration," Taxation Papers 30, Directorate General Taxation and Customs Union, European Commission.
    7. Hemmelgarn, Thomas & Nicodeme, Gaetan, 2010. "The 2008 Financial Crisis and Taxation Policy," CEPR Discussion Papers 7666, C.E.P.R. Discussion Papers.
    8. Anna Pomeranets & Daniel G. Weaver, 2011. "Security Transaction Taxes and Market Quality," Working Papers 11-26, Bank of Canada.
    9. Buch, Claudia M. & Heinrich, Ralph P. & Pierdzioch, Christian, 2001. "Globalisierung der Finanzmärkte: Freier Kapitalverkehr oder Tobin-Steuer?," Kiel Discussion Papers 381, Kiel Institute for the World Economy (IfW).
    10. Jack M. Mintz, 2003. "Taxing Financial Activity," International Tax Program Papers 0305, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto.
    11. Robert Pollin & Dean Baker & Marc Schaberg, 2003. "Securities Transaction Taxes for U.S. Financial Markets," Eastern Economic Journal, Eastern Economic Association, vol. 29(4), pages 527-558, Fall.
    12. Hau, Harald, 2002. "The Role of Transaction Costs for Financial Volatility: Evidence from the Paris Bourse," CEPR Discussion Papers 3651, C.E.P.R. Discussion Papers.
    13. Thornton Matheson, 2011. "Taxing Financial Transactions," IMF Working Papers 11/54, International Monetary Fund.
    14. de Oliveira Souza, Thiago, 2014. "Discount rates, market frictions, and the mystery of the size premium," Discussion Papers of Business and Economics 15/2014, Department of Business and Economics, University of Southern Denmark.
    15. Alexander Gümbel, 2005. "Should short-term speculators be taxed, or subsidised?," Annals of Finance, Springer, vol. 1(3), pages 327-348, 08.
    16. Yiannis Kitromilides & Ana Rosa González, 2013. "The EU Financial Transactions Tax: Antecedents and Current Debate," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(3), pages 311-321, May.
    17. Victoria Saporta & Kamhon Kan, 1997. "The effects of Stamp Duty on the Level and Volatility of Equity Prices," Bank of England working papers 71, Bank of England.
    18. Markus Haberer, 2004. "Might a Securities Transactions Tax Mitigate Excess Volatility?: Some Evidence From the Literature," CoFE Discussion Paper 04-06, Center of Finance and Econometrics, University of Konstanz.
    19. Jiří Kostohryz, 2011. "Tax Measures Taken to Fight the Crisis in Developed Countries," Český finanční a účetní časopis, University of Economics, Prague, vol. 2011(1), pages 55-67.

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