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Tax incidence for fragile financial markets

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  • Bierbrauer, Felix

Abstract

Standard tax incidence analysis deals with households and firms that buy and sell consumption goods, as opposed to financial institutions that buy and sell financial products. This paper develops a framework that allows us to study tax incidence on financial markets, and applies it to a financial transactions tax. A main result is that the tax may contribute to financial distress. Moreover, if the government has to bail out the debtors of failed financial institutions, the tax-induced increase in bailout costs may be larger than the increase in tax revenue, so that the government's overall fiscal position becomes worse.

Suggested Citation

  • Bierbrauer, Felix, 2014. "Tax incidence for fragile financial markets," Journal of Public Economics, Elsevier, vol. 120(C), pages 107-125.
    • Handle: RePEc:eee:pubeco:v:120:y:2014:i:c:p:107-125
    DOI: 10.1016/j.jpubeco.2014.09.002
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    References listed on IDEAS

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    Cited by:

    1. Michael Kogler, 2019. "On the incidence of bank levies: theory and evidence," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(4), pages 677-718, August.
    2. Tri Vi Dang & Xiaoxi Liu & Florian Morath, 2022. "Taxation, Information Acquisition, and Trade in Decentralized Markets: Theory and Test," Working Papers 2022-08, Faculty of Economics and Statistics, Universität Innsbruck.

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    More about this item

    Keywords

    Tax incidence; Financial markets; Financial transactions tax;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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