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Taxation of Financial Intermediation : Theory and Practice for Emerging Economines

  • Patrick Honohan

This volume examines the possibilities and pitfalls to successful financial sector tax reform from theoretical, empirical and practical perspectives. It explores the possibilities and limitations of "big ideas" such as removal of all capital income taxation, the application of VAT to financial services or heavy reliance on financial transactions taxes. The risks of attempting to use financial sector taxes as corrective instruments are stressed. Two defensive criteria are advanced as key: making the financial tax system as arbitrage- and inflation-proof as is practicable. Each commissioned essay develops a distinct aspect of the area. Theoretical chapters model the impact of taxes on intermediaries, the design of optimal tax schemes, the role of imperfect information and the relationship with saving. Current practice in the industrial world and case studies of distorted national systems provide an empirical underpinning. Finally, experience with several of the main practical issues is discussed in chapters ranging from the income tax treatment of intermediary loan-loss reserves, the VAT, financial transactions taxes, deposit insurance and inflation. Contributors are distinguished academics and practitioners.

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This book is provided by The World Bank in its series World Bank Publications with number 15122 and published in 2003.
ISBN: 0-8213-5434-5
Handle: RePEc:wbk:wbpubs:15122
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Web page: https://openknowledge.worldbank.org
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  1. S. Rao Aiyagari & R. Anton Braun & Zvi Eckstein, 1998. "Transaction Services, Inflation, and Welfare," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1274-1301, December.
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  8. Mankiw, N. Gregory, 1987. "The optimal collection of seigniorage : Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 20(2), pages 327-341, September.
  9. By Mohsin S. Khan & Abdelhak S. Senhadji, 2001. "Threshold Effects in the Relationship Between Inflation and Growth," IMF Staff Papers, Palgrave Macmillan, vol. 48(1), pages 1.
  10. Cooley, T.F. & Hansen, G.D., 1991. "The Welfare Costs of Moderate Inflations," Papers 90-04, Rochester, Business - General.
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  12. Calvo, Guillermo A & Guidotti, Pablo E, 1993. "On the Flexibility of Monetary Policy: The Case of the Optimal Inflation Tax," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 667-87, July.
  13. Fry, Maxwell J., 1981. "Government revenue from monopoly supply of currency and deposits," Journal of Monetary Economics, Elsevier, vol. 8(2), pages 261-270.
  14. Marco Espinosa-Vega & Steven Russell, 1999. "A public finance analysis of multiple reserve requirements," Working Paper 99-19, Federal Reserve Bank of Atlanta.
  15. Michael Bruno & William Easterly, 1995. "Inflation Crises and Long-Run Growth," NBER Working Papers 5209, National Bureau of Economic Research, Inc.
  16. Lihong Liu & Anne Sibert, 1996. "Government Finance with Currency Substitution," Archive Discussion Papers 9609, Birkbeck, Department of Economics, Mathematics & Statistics.
  17. James Tobin, 1978. "A Proposal for International Monetary Reform," Cowles Foundation Discussion Papers 506, Cowles Foundation for Research in Economics, Yale University.
  18. Demirguc-Kunt, Asli & Huizinga, Harry, 1998. "Determinants of commercial bank interest margins and profitability : some international evidence," Policy Research Working Paper Series 1900, The World Bank.
  19. Marco Espinosa & Chong K. Yip, 2000. "Government Financing in an Endogenous Growth Model with Financial Market Restrictions," Departmental Working Papers _118, Chinese University of Hong Kong, Department of Economics.
  20. Freeman, Scott, 1987. "Reserve requirements and optimal seigniorage," Journal of Monetary Economics, Elsevier, vol. 19(2), pages 307-314, March.
  21. Repullo, Rafael, 1991. "Financing Budget Deficits by Seigniorage and Implicit Taxation: The Cases of Spain and Portugal," CEPR Discussion Papers 583, C.E.P.R. Discussion Papers.
  22. Espinosa-Vega, Marco A, 1995. "Multiple Reserve Requirements," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 762-76, August.
  23. Bacchetta, Philippe & Caminal, Ramon, 1992. "Optimal seigniorage and financial liberalization," Journal of International Money and Finance, Elsevier, vol. 11(6), pages 518-538, December.
  24. Marco Espinosa-Vega & Steven Russell, 2001. "Stability of steady states in a model of pleasant monetarist arithmetic," Working Paper 2001-20, Federal Reserve Bank of Atlanta.
  25. Bali, Turan G. & Thurston, Thom, 2000. "Empirical estimates of inflation tax Laffer surfaces: a 30-country study," Journal of Development Economics, Elsevier, vol. 63(2), pages 529-546, December.
  26. Baltensperger, Ernst & Jordan, Thomas J., 1997. "Seigniorage, banking, and the optimal quantity of money," Journal of Banking & Finance, Elsevier, vol. 21(6), pages 781-796, June.
  27. Saunders, Anthony & Schumacher, Liliana, 2000. "The determinants of bank interest rate margins: an international study," Journal of International Money and Finance, Elsevier, vol. 19(6), pages 813-832, December.
  28. Michael Sarel, 1996. "Nonlinear Effects of Inflation on Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 43(1), pages 199-215, March.
  29. Anand, Ritu & van Wijnbergen, Sweder, 1989. "Inflation and the Financing of Government Expenditure: An Introductory Analysis with an Application to Turkey," World Bank Economic Review, World Bank Group, vol. 3(1), pages 17-38, January.
  30. Goff, Brian L & Toma, Mark, 1993. "Optimal Seigniorage, the Gold Standard, and Central Bank Financing," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(1), pages 79-95, February.
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