IDEAS home Printed from https://ideas.repec.org/a/kap/itaxpf/v19y2012i6p884-912.html
   My bibliography  Save this article

Security transaction taxes: issues and evidence

Author

Listed:
  • Thornton Matheson

Abstract

In reaction to the financial crisis, increased attention has recently been given to security transaction taxes (STTs) as a means of (1) raising revenue for a variety of possible purposes and/or (2) helping to curb financial market excesses. This paper reviews existing theory and evidence on the efficacy of an STT in fulfilling those tasks, on its potential impact, and on key issues to be faced in designing taxes of this kind. Copyright Springer Science+Business Media, LLC 2012

Suggested Citation

  • Thornton Matheson, 2012. "Security transaction taxes: issues and evidence," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(6), pages 884-912, December.
    • Handle: RePEc:kap:itaxpf:v:19:y:2012:i:6:p:884-912
    DOI: 10.1007/s10797-012-9212-5
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10797-012-9212-5
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10797-012-9212-5?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Harald Hau, 2006. "The Role of Transaction Costs for Financial Volatility: Evidence from the Paris Bourse," Journal of the European Economic Association, MIT Press, vol. 4(4), pages 862-890, June.
    2. Jones, Charles M & Seguin, Paul J, 1997. "Transaction Costs and Price Volatility: Evidence from Commission Deregulation," American Economic Review, American Economic Association, vol. 87(4), pages 728-737, September.
    3. James Tobin, 1978. "A Proposal for International Monetary Reform," Eastern Economic Journal, Eastern Economic Association, vol. 4(3-4), pages 153-159, Jul/Oct.
    4. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 215-268, November.
    5. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters, in: This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press.
    6. Hanke, Michael & Huber, Jürgen & Kirchler, Michael & Sutter, Matthias, 2010. "The economic consequences of a Tobin tax--An experimental analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 74(1-2), pages 58-71, May.
    7. Badi Baltagi & Dong Li & Qi Li, 2006. "Transaction tax and stock market behavior: evidence from an emerging market," Empirical Economics, Springer, vol. 31(2), pages 393-408, June.
    8. Westerhoff, Frank H. & Dieci, Roberto, 2006. "The effectiveness of Keynes-Tobin transaction taxes when heterogeneous agents can trade in different markets: A behavioral finance approach," Journal of Economic Dynamics and Control, Elsevier, vol. 30(2), pages 293-322, February.
    9. De Long, J Bradford & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1990. "Noise Trader Risk in Financial Markets," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 703-738, August.
    10. Umlauf, Steven R., 1993. "Transaction taxes and the behavior of the Swedish stock market," Journal of Financial Economics, Elsevier, vol. 33(2), pages 227-240, April.
    11. Hu, Shing-yang, 1998. "The effects of the stock transaction tax on the stock market - Experiences from Asian markets," Pacific-Basin Finance Journal, Elsevier, vol. 6(3-4), pages 347-364, August.
    12. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production: I--Production Efficiency," American Economic Review, American Economic Association, vol. 61(1), pages 8-27, March.
    13. J. E. Stiglitz, 1969. "The Effects of Income, Wealth, and Capital Gains Taxation on Risk-Taking," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 83(2), pages 263-283.
    14. Subrahmanyam, Avanidhar, 1998. "Transaction Taxes and Financial Market Equilibrium," The Journal of Business, University of Chicago Press, vol. 71(1), pages 81-118, January.
    15. Ms. Thornton Matheson, 2011. "Taxing Financial Transactions: Issues and Evidence," IMF Working Papers 2011/054, International Monetary Fund.
    16. Li, Geng, 2009. "Transaction costs and consumption," Journal of Economic Dynamics and Control, Elsevier, vol. 33(6), pages 1263-1277, June.
    17. French, Kenneth R. & Roll, Richard, 1986. "Stock return variances : The arrival of information and the reaction of traders," Journal of Financial Economics, Elsevier, vol. 17(1), pages 5-26, September.
    18. Pellizzari, Paolo & Westerhoff, Frank, 2009. "Some effects of transaction taxes under different microstructures," Journal of Economic Behavior & Organization, Elsevier, vol. 72(3), pages 850-863, December.
    19. Dominique Dupont & Gabriel Lee, 2007. "Effects of Securities Transaction Taxes on Depth and Bid-Ask Spread," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 31(2), pages 393-400, May.
    20. Roll, R., 1989. "Price Volatility, International Market Links, And Their Implications For Regulatory Policies," Papers t10, Columbia - Center for Futures Markets.
    21. Steve Bond & Mike Hawkins & Alexander Klemm, 2005. "Stamp Duty on Shares and Its Effect on Share Prices," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 61(3), pages 275-297, November.
    22. Froot, Kenneth A & Scharftstein, David S & Stein, Jeremy C, 1992. "Herd on the Street: Informational Inefficiencies in a Market with Short-Term Speculation," Journal of Finance, American Finance Association, vol. 47(4), pages 1461-1484, September.
    23. Mr. John D Brondolo, 2011. "Taxing Financial Transactions: An Assessment of Administrative Feasibility," IMF Working Papers 2011/185, International Monetary Fund.
    24. George H. K. Wang & Jot Yau & Tony Baptiste, 1997. "Trading volume and transaction costs in futures markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 17(7), pages 757-780, October.
    25. Summers, L.H. & Summers, V.P., 1989. "When Financial Markets Work Too Well : A Cautious Case For A Securities Transactions Tax," Papers t12, Columbia - Center for Futures Markets.
    26. Mr. Karl F Habermeier & Mr. Andrei A Kirilenko, 2001. "Securities Transaction Taxes and Financial Markets," IMF Working Papers 2001/051, International Monetary Fund.
    27. Brad M. Barber & Terrance Odean, 2000. "Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors," Journal of Finance, American Finance Association, vol. 55(2), pages 773-806, April.
    28. George M. Constantinides, 2005. "Capital Market Equilibrium with Transaction Costs," World Scientific Book Chapters, in: Sudipto Bhattacharya & George M Constantinides (ed.), Theory Of Valuation, chapter 7, pages 207-227, World Scientific Publishing Co. Pte. Ltd..
    29. Robert Pollin & Dean Baker & Marc Schaberg, 2003. "Securities Transaction Taxes for U.S. Financial Markets," Eastern Economic Journal, Eastern Economic Association, vol. 29(4), pages 527-558, Fall.
    30. Shinhua Liu, 2007. "Securities Transaction Tax and Market Efficiency: Evidence from the Japanese Experience," Journal of Financial Services Research, Springer;Western Finance Association, vol. 32(3), pages 161-176, December.
    31. Harry Huizinga, 2002. "A European VAT on financial services? [‘Taxation of financial services under a VAT’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 17(35), pages 497-534.
    32. Xu, Juanyi, 2010. "Noise traders, exchange rate disconnect puzzle, and the Tobin tax," Journal of International Money and Finance, Elsevier, vol. 29(2), pages 336-357, March.
    33. Terrence Hendershott & Charles M. Jones & Albert J. Menkveld, 2011. "Does Algorithmic Trading Improve Liquidity?," Journal of Finance, American Finance Association, vol. 66(1), pages 1-33, February.
    34. Allen, Franklin & Gale, Douglas, 2000. "Bubbles and Crises," Economic Journal, Royal Economic Society, vol. 110(460), pages 236-255, January.
    35. Stephan Schulmeister & Margit Schratzenstaller & Oliver Picek, 2008. "A General Financial Transaction Tax. Motives, Revenues, Feasibility and Effects," WIFO Studies, WIFO, number 31819, April.
    36. Frank M. Song & Junxi Zhang, 2005. "Securities Transaction Tax and Market Volatility," Economic Journal, Royal Economic Society, vol. 115(506), pages 1103-1120, October.
    37. Barclay, Michael J & Litzenberger, Robert H & Warner, Jerold B, 1990. "Private Information, Trading Volume, and Stock-Return Variances," The Review of Financial Studies, Society for Financial Studies, vol. 3(2), pages 233-253.
    38. Stiglitz, J.E., 1989. "Using Tax Policy To Curb Speculative Short-Term Trading," Papers t2, Columbia - Center for Futures Markets.
    39. Green, Christopher J. & Maggioni, Paolo & Murinde, Victor, 2000. "Regulatory lessons for emerging stock markets from a century of evidence on transactions costs and share price volatility in the London Stock Exchange," Journal of Banking & Finance, Elsevier, vol. 24(4), pages 577-601, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cappelletti, Giuseppe & Guazzarotti, Giovanni & Tommasino, Pietro, 2017. "The stock market effects of a securities transaction tax: Quasi-experimental evidence from Italy," Journal of Financial Stability, Elsevier, vol. 31(C), pages 81-92.
    2. Lavička, H. & Lichard, T. & Novotný, J., 2016. "Sand in the wheels or wheels in the sand? Tobin taxes and market crashes," International Review of Financial Analysis, Elsevier, vol. 47(C), pages 328-342.
    3. Leduc, Matt V. & Thurner, Stefan, 2017. "Incentivizing resilience in financial networks," Journal of Economic Dynamics and Control, Elsevier, vol. 82(C), pages 44-66.
    4. Piero Mazzarisi & Fabrizio Lillo & Stefano Marmi, 2018. "When panic makes you blind: a chaotic route to systemic risk," Papers 1805.00785, arXiv.org.
    5. Frenzel Baudisch, Coletta & Dresselhaus, Carolin, 2019. "Impact of the German Real Estate Transfer Tax on the Commercial Real Estate Market," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203494, Verein für Socialpolitik / German Economic Association.
    6. Mazzarisi, Piero & Lillo, Fabrizio & Marmi, Stefano, 2019. "When panic makes you blind: A chaotic route to systemic risk," Journal of Economic Dynamics and Control, Elsevier, vol. 100(C), pages 176-199.
    7. Bratis, Theodoros & Laopodis, Nikiforos T. & Kouretas, Georgios P., 2017. "Assessing the impact of an EU financial transactions tax on asset volatility: An event study," International Review of Financial Analysis, Elsevier, vol. 53(C), pages 12-24.
    8. Paulo Pereira Silva, 2023. "Securities transaction taxes and stock price informativeness: evidence for France and Italy," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 37(3), pages 325-345, September.
    9. Katherine Baer & Ruud De Mooij & Shafik Hebous & Michael Keen, 2023. "Taxing cryptocurrencies," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 39(3), pages 478-497.
    10. Petkova, Kunka & Weichenrieder, Alfons, 2017. "Price and Quantity Effects of the German Real Estate Transfer Tax," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168305, Verein für Socialpolitik / German Economic Association.
    11. Petkova, Kunka & Weichenrieder, Alfons J., 2019. "Grunderwerbsteuer: Eine Steuer für das 21. Jahrhundert?," SAFE White Paper Series 58, Leibniz Institute for Financial Research SAFE.
    12. Katherine Baer & Ruud De Mooij & Shafik Hebous & Michael Keen, 2023. "Taxing cryptocurrencies," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 39(3), pages 478-497.
    13. Frenzel Baudisch, Coletta & Dresselhaus, Carolin, 2018. "Impact of the German real estate transfer: Tax on the commercial real estate market," Finanzwissenschaftliche Arbeitspapiere 100, Justus Liebig University Giessen, Fachbereich Wirtschaftswissenschaften.
    14. Mr. Luc Eyraud, 2014. "Reforming Capital Taxation in Italy," IMF Working Papers 2014/006, International Monetary Fund.
    15. Limodio,Nicola & Strobbe,Francesco, 2016. "Financial regulation and government revenue : the effects of a policy change in Ethiopia," Policy Research Working Paper Series 7733, The World Bank.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ms. Thornton Matheson, 2011. "Taxing Financial Transactions: Issues and Evidence," IMF Working Papers 2011/054, International Monetary Fund.
    2. Thornton Matheson, 2014. "The Effect of a Low-Rate Transaction Tax on a Highly Liquid Market," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 70(4), pages 487-510, December.
    3. Alonso, Miguel A. & Rallo, Juan Ramón & Romero, Alberto, 2013. "El efecto de los impuestos a las transacciones financieras en la estabilidad de los mercados de capital. Un debate sin resolver," El Trimestre Económico, Fondo de Cultura Económica, vol. 0(317), pages 207-231, enero-mar.
    4. Neil McCulloch & Grazia Pacillo, 2010. "The Tobin Tax A Review of the Evidence," Working Paper Series 1611, Department of Economics, University of Sussex Business School.
    5. Capelle-Blancard, Gunther & Havrylchyk, Olena, 2016. "The impact of the French securities transaction tax on market liquidity and volatility," International Review of Financial Analysis, Elsevier, vol. 47(C), pages 166-178.
    6. Deng, Yongheng & Liu, Xin & Wei, Shang-Jin, 2018. "One fundamental and two taxes: When does a Tobin tax reduce financial price volatility?," Journal of Financial Economics, Elsevier, vol. 130(3), pages 663-692.
    7. Lendvai, Julia & Raciborski, Rafal & Vogel, Lukas, 2013. "Macroeconomic effects of an equity transaction tax in a general-equilibrium model," Journal of Economic Dynamics and Control, Elsevier, vol. 37(2), pages 466-482.
    8. Jürgen Antony & Michiel Bijlsma & Adam Elbourne & Marcel Lever & Gijsbert Zwart, 2012. "Financial transaction tax: review and assessment," CPB Discussion Paper 202.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    9. Thomas Hemmelgarn & Gaetan Nicodeme, 2010. "The 2008 Financial Crisis and Taxation Policy," Taxation Papers 20, Directorate General Taxation and Customs Union, European Commission.
    10. Rudolf Alvise Lennkh & Florian Walch, 2015. "Collateral Damage? Micro-Simulation of Transaction Cost Shocks on the Value of Central Bank Collateral," Working Papers 6, European Stability Mechanism.
    11. Eichfelder, Sebastian & Lau, Mona & Noth, Felix, 2018. "The impact of financial transaction taxes on stock markets: Short-run effects, long-run effects, and migration," arqus Discussion Papers in Quantitative Tax Research 228, arqus - Arbeitskreis Quantitative Steuerlehre.
    12. Huber, Jürgen & Kleinlercher, Daniel & Kirchler, Michael, 2012. "The impact of a financial transaction tax on stylized facts of price returns—Evidence from the lab," Journal of Economic Dynamics and Control, Elsevier, vol. 36(8), pages 1248-1266.
    13. Leal, Sandrine Jacob & Napoletano, Mauro, 2019. "Market stability vs. market resilience: Regulatory policies experiments in an agent-based model with low- and high-frequency trading," Journal of Economic Behavior & Organization, Elsevier, vol. 157(C), pages 15-41.
    14. repec:hal:spmain:info:hdl:2441/6ummnc8nko827b2luohnctekk7 is not listed on IDEAS
    15. Sandrine Jacob Leal & Mauro Napoletano, 2017. "Market Stability vs. Market Resilience: Regulatory Policies Experiments in an Agent-Based Model with Low- and High-Frequency Trading," Post-Print hal-01768876, HAL.
    16. Cappelletti, Giuseppe & Guazzarotti, Giovanni & Tommasino, Pietro, 2017. "The stock market effects of a securities transaction tax: Quasi-experimental evidence from Italy," Journal of Financial Stability, Elsevier, vol. 31(C), pages 81-92.
    17. Walch, Florian & Lennkh, Rudolf Alvise, 2015. "Collateral damage? Micro-simulation of transaction cost shocks on the value of central bank collateral," Working Paper Series 1793, European Central Bank.
    18. Kirchler, Michael & Huber, Jürgen & Kleinlercher, Daniel, 2011. "Market microstructure matters when imposing a Tobin tax—Evidence from the lab," Journal of Economic Behavior & Organization, Elsevier, vol. 80(3), pages 586-602.
    19. repec:hal:spmain:info:hdl:2441/3utlh0ehcn860pus6p2p683ade is not listed on IDEAS
    20. Peter Gomber & Martin Haferkorn & Kai Zimmermann, 2016. "Securities Transaction Tax and Market Quality – the Case of France," European Financial Management, European Financial Management Association, vol. 22(2), pages 313-337, March.
    21. Jürgen Antony & Michiel Bijlsma & Adam Elbourne & Marcel Lever & Gijsbert Zwart, 2012. "Financial transaction tax: review and assessment," CPB Discussion Paper 202, CPB Netherlands Bureau for Economic Policy Analysis.
    22. Michał Zator, 2014. "Transaction costs and volatility on Warsaw Stock Exchange: implications for financial transaction tax," Bank i Kredyt, Narodowy Bank Polski, vol. 45(4), pages 349-372.

    More about this item

    Keywords

    Financial transaction tax; Tobin tax; H21; G18;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:itaxpf:v:19:y:2012:i:6:p:884-912. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.