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Financial transaction tax: review and assessment

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  • Jürgen Antony

    ()

  • Michiel Bijlsma

    ()

  • Adam Elbourne

    ()

  • Marcel Lever

    ()

  • Gijsbert Zwart

    ()

Abstract

We explore whether a Financial Transactions Tax (FTT) is likely to correct the market failures that have contributed to the financial crisis, to what extent FTT succeeds in raising revenues, and how the FTT compares to alternative taxes in terms of efficiency. We�find little evidence that the FTT will be effective in correcting�market failures. Taxing of transactions is not well targeted at�behaviour that leads to excessive risk and systemic risk creation. The empirical evidence does not suggest that the introduction of an FTT�reduces volatility or asset price bubbles. An FTT will likely raise�significant revenues and we estimate those revenues for the�Netherlands. In the short term, the incidence of the tax will be�chiefly on the current holders of securities. Ultimately, the tax will�be borne in part by end users, and we estimate the likely effects on�economic growth. When compared to alternative forms of taxation of the�financial sector, the FTT is likely less e� fficient given the amount�of revenues. In particular, taxes that more directly address existing�distortions, such as the current VAT exemption for banks, and the bias�towards debt financing, provide more efficient alternatives. �

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Bibliographic Info

Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 202.

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Date of creation: Jan 2012
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Handle: RePEc:cpb:discus:202

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Cited by:
  1. Hara, Chiaki, 2012. "Asset prices, trading volumes, and investor welfare in markets with transaction costs," CIS Discussion paper series 556, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  2. Chiaki Hara, 2013. "Asset Prices, Trading Volumes, and Investor Welfare in Markets with Transaction Costs," KIER Working Papers 862, Kyoto University, Institute of Economic Research.

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