Financial Transaction Tax Contributes to More Sustainability in Financial Markets
AbstractWe argue that a financial transaction tax complements financial market regulation. With the tax, governments have an additional instrument at hand to influence trading activity. FTT aims to reduce regulatory arbitrage, flash trading, overactive portfolio management, excessive leverage and speculative transactions of financial institutions. The focus clearly addresses these classes of activities that have contributed to the financial crisis. However, if contrary to expectations harmful transactions will not be curbed, FFT generates at least large tax revenues that can contribute to cover the costs of the financial crisis. The trend towards centralized clearing and depositaries makes tax evasion more difficult than it was in the past. Tax avoidance is, of course, never completely avoidable. Therefore the effect of the tax should be monitored closely so that governments can react quickly if tax loopholes and taxinduced geographical relocation plans of financial institutions come to light.
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Bibliographic InfoPaper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 1198.
Length: 15 p.
Date of creation: 2012
Date of revision:
Financial stability; transaction tax; public good; central depository;
Find related papers by JEL classification:
- G20 - Financial Economics - - Financial Institutions and Services - - - General
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
- NEP-ACC-2012-03-28 (Accounting & Auditing)
- NEP-ALL-2012-03-28 (All new papers)
- NEP-IUE-2012-03-28 (Informal & Underground Economics)
- NEP-PBE-2012-03-28 (Public Economics)
- NEP-PUB-2012-03-28 (Public Finance)
- NEP-REG-2012-03-28 (Regulation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Carol L. Clark, 2010. "Controlling risk in a lightning-speed trading environment," Chicago Fed Letter, Federal Reserve Bank of Chicago, issue Feb.
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Discussion Papers of DIW Berlin
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- Schäfer, Dorothea & Zimmermann, Klaus F., 2009. "Bad Bank(s) and Recapitalization of the Banking Sector," IZA Policy Papers 10, Institute for the Study of Labor (IZA).
- Schäfer, Dorothea & Zimmermann, Klaus F., 2009. "Bad Bank(s) and Recapitalization of the Banking Sector," CEPR Discussion Papers 7349, C.E.P.R. Discussion Papers.
- Dorothea Schäfer & Klaus F. Zimmermann, 2009. "Bad Bank(s) and Recapitalization of the Banking Sector," Working Paper / FINESS 3.1B, DIW Berlin, German Institute for Economic Research.
- Carol L. Clark, 2010. "Controlling risk in a lightning-speed trading environment," Policy Discussion Paper Series PDP-2010-01, Federal Reserve Bank of Chicago.
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