Taxing Financial Activity
AbstractIn most countries, substantial business activity is related to financial intermediation: banking, trusts, investment companies and insurance. Financial businesses play a crucial role in the economy by matching lenders with borrowers as well as facilitating governance of businesses through close monitoring of funds lent to businesses. Financial institutions also reduce risk faced by investors by pooling investments over many different types of business activities and insuring against property, casualty and death risks. A significant part of the financial sector is regulated but an impressive array of financial activities is undertaken by unregulated and informal parts of the economy. Unlike other industries, tax systems often treat financial activity in a special way. Why is this so? In this module, I shall review the rationale and technical issues related to the taxation of financial activity by answering the following questions: What is financial intermediation? What are the roles of financial service providers in the economy so as to guide policy makers regarding the appropriate design of taxes? How are individual types of taxes designed to deal with special considerations related to financial activities? What are the economic impacts of taxes on financial activity?
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Bibliographic InfoPaper provided by International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto in its series International Tax Program Papers with number 0305.
Length: 28 Pages
Date of creation: Dec 2003
Date of revision:
Publication status: Published under same title in Bulletin for International Fiscal Documentation, vol. 58, no. 3, pp. 99-111.
Financial institutions; taxation; financial intermediation;
Find related papers by JEL classification:
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-ACC-2004-12-12 (Accounting & Auditing)
- NEP-ALL-2004-12-12 (All new papers)
- NEP-MFD-2004-12-12 (Microfinance)
- NEP-PUB-2004-12-12 (Public Finance)
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