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A General Financial Transactions Tax. Motives, Effects and Implementation According to the Proposal of the European Commission

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  • Stephan Schulmeister

    (WIFO)

Abstract

The paper summarises at first the main arguments in favour and against a FTT and provides empirical evidence about the movements of the most important asset prices. It is shown that their long swings result from the accumulation of extremely short-term price runs over time. Therefore a (very) small FTT – between 0.1 and 0.01 percent – would mitigate price volatility not only over the short run but also over the long run. The subsequent section discusses the most important implementation issues if only a group of 11 EU member countries introduces this tax (without the UK). If London subsidiaries of banks established in one of the FTT countries are treated as part of their parent company, overall FTT revenues of the 11 FTT countries are estimated at € 65.8 billion, if London subsidiaries are treated as British financial institutions, tax revenues would amount to only € 28.3 billion.

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Bibliographic Info

Paper provided by WIFO in its series WIFO Working Papers with number 461.

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Length: 30 pages
Date of creation: 07 Feb 2014
Date of revision:
Handle: RePEc:wfo:wpaper:y:2014:i:461

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References

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  1. Stephan Schulmeister, 2008. "Profitability of Technical Currency Speculation. The Case of Yen-Dollar Trading 1976-2007," WIFO Working Papers 325, WIFO.
  2. European Commission, 2010. "Innovative Financing at a Global Level," Taxation Studies 0031, Directorate General Taxation and Customs Union, European Commission.
  3. Stephan Schulmeister, 2005. "Components of the Profitability of Technical Currency Trading," WIFO Working Papers 263, WIFO.
  4. Stephan Schulmeister, 2007. "Aggregate Trading Behavior of Technical Models and the Yen/Dollar Exchange Rate," WIFO Working Papers 294, WIFO.
  5. Eichengreen, Barry & Tobin, James & Wyplosz, Charles, 1995. "Two Cases for Sand in the Wheels of International Finance," Economic Journal, Royal Economic Society, vol. 105(428), pages 162-72, January.
  6. Schulmeister, Stephan, 2009. "Profitability of technical stock trading: Has it moved from daily to intraday data?," Review of Financial Economics, Elsevier, vol. 18(4), pages 190-201, October.
  7. Yin-Wong Cheung & Menzie D. Chinn & Ian W. Marsh, 2000. "How Do UK-Based Foreign Exchange Dealers Think Their Market Operates?," NBER Working Papers 7524, National Bureau of Economic Research, Inc.
  8. De Long, J. Bradford & Shleifer, Andrei & Summers, Lawrence H. & Waldmann, Robert J., 1990. "Noise Trader Risk in Financial Markets," Scholarly Articles 3725552, Harvard University Department of Economics.
  9. Schulmeister, Stephan, 2006. "The interaction between technical currency trading and exchange rate fluctuations," Finance Research Letters, Elsevier, vol. 3(3), pages 212-233, September.
  10. European Commission, 2010. "Financial Sector Taxation," Taxation Papers 25, Directorate General Taxation and Customs Union, European Commission.
  11. repec:fth:calaec:13-89 is not listed on IDEAS
  12. De Long, J Bradford, et al, 1990. " Positive Feedback Investment Strategies and Destabilizing Rational Speculation," Journal of Finance, American Finance Association, vol. 45(2), pages 379-95, June.
  13. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
  14. Marc Schaberg & Dean Baker & Robert Pollin, 2002. "Securities Transaction Taxes for U.S. Financial Markets," Working Papers wp20, Political Economy Research Institute, University of Massachusetts at Amherst.
  15. LeRoy, Stephen F, 1989. "Efficient Capital Markets and Martingales," Journal of Economic Literature, American Economic Association, vol. 27(4), pages 1583-1621, December.
  16. Thomas Gehrig & Lukas Menkhoff, 2006. "Extended evidence on the use of technical analysis in foreign exchange," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 11(4), pages 327-338.
  17. Robert J. Shiller, 2003. "From Efficient Markets Theory to Behavioral Finance," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 83-104, Winter.
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