Financial transaction tax: review and assessment
We explore whether a Financial Transactions Tax (FTT) is likely to correct the market failures that have contributed to the financial crisis, to what extent FTT succeeds in raising revenues, and how the FTT compares to alternative taxes in terms of efficiency. We�find little evidence that the FTT will be effective in correcting�market failures. Taxing of transactions is not well targeted at�behaviour that leads to excessive risk and systemic risk creation. The empirical evidence does not suggest that the introduction of an FTT�reduces volatility or asset price bubbles. An FTT will likely raise�significant revenues and we estimate those revenues for the�Netherlands. In the short term, the incidence of the tax will be�chiefly on the current holders of securities. Ultimately, the tax will�be borne in part by end users, and we estimate the likely effects on�economic growth. When compared to alternative forms of taxation of the�financial sector, the FTT is likely less e� fficient given the amount�of revenues. In particular, taxes that more directly address existing�distortions, such as the current VAT exemption for banks, and the bias�towards debt financing, provide more efficient alternatives. �
|Date of creation:||Jan 2012|
|Date of revision:|
|Contact details of provider:|| Postal: Postbus 80510, 2508 GM Den Haag|
Phone: (070) 338 33 80
Fax: (070) 338 33 50
Web page: http://www.cpb.nl/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Acharya, Viral V. & Pedersen, Lasse Heje, 2005.
"Asset pricing with liquidity risk,"
Journal of Financial Economics,
Elsevier, vol. 77(2), pages 375-410, August.
- Acharya, Viral V & Pedersen, Lasse Heje, 2004. "Asset Pricing with Liquidity Risk," CEPR Discussion Papers 4718, C.E.P.R. Discussion Papers.
- Viral V. Acharya & Lasse Heje Pedersen, 2004. "Asset Pricing with Liquidity Risk," NBER Working Papers 10814, National Bureau of Economic Research, Inc.
- Acharya, Viral V & Pedersen, Lasse Heje, 2003. "Asset Pricing with Liquidity Risk," CEPR Discussion Papers 3749, C.E.P.R. Discussion Papers.
- Rohit Rahi & James Dow, 1998.
"Should Speculators be Taxed?,"
FMG Discussion Papers
dp291, Financial Markets Group.
- Simon Gilchrist & Vladimir Yankov & Egon Zakrajsek, 2009.
"Credit Market Shocks and Economic Fluctuations: Evidence from Corporate Bond and Stock Markets,"
NBER Working Papers
14863, National Bureau of Economic Research, Inc.
- Gilchrist, Simon & Yankov, Vladimir & Zakrajsek, Egon, 2009. "Credit market shocks and economic fluctuations: Evidence from corporate bond and stock markets," Journal of Monetary Economics, Elsevier, vol. 56(4), pages 471-493, May.
- Vladimir Yankov & Egon Zakrajsek & Simon Gilchrist, 2009. "Credit Market Shocks and Economic Fluctuations: Evidence from Corporate Bond and Stock Markets," 2009 Meeting Papers 514, Society for Economic Dynamics.
- Robert Bloomfield & Maureen O'Hara & Gideon Saar, 2009. "How Noise Trading Affects Markets: An Experimental Analysis," Review of Financial Studies, Society for Financial Studies, vol. 22(6), pages 2275-2302, June.
- Jose A. Scheinkman & Wei Xiong, 2003. "Overconfidence and Speculative Bubbles," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1183-1219, December.
- Reinhart, Carmen, 2009.
"The Second Great Contraction,"
21485, University Library of Munich, Germany.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2009.
"Varieties of Crises and Their Dates
[This Time Is Different: Eight Centuries of Financial Folly]," Introductory Chapters, Princeton University Press.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "This Time Is Different: Eight Centuries of Financial Folly," Economics Books, Princeton University Press, edition 1, volume 1, number 8973.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates
- Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, June.
- Schaller, Huntley, 2006. "Estimating the long-run user cost elasticity," Journal of Monetary Economics, Elsevier, vol. 53(4), pages 725-736, May.
- Nadja Dwenger, 2014. "User Cost Elasticity of Capital Revisited," Economica, London School of Economics and Political Science, vol. 81(321), pages 161-186, 01.
- Subrahmanyam, Avanidhar, 1998. "Transaction Taxes and Financial Market Equilibrium," The Journal of Business, University of Chicago Press, vol. 71(1), pages 81-118, January.
- 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-, November.
- Steve Bond & Mike Hawkins & Alexander Klemm, 2004. "Stamp duty on shares and its effect on share prices," IFS Working Papers W04/11, Institute for Fiscal Studies.
- Thornton Matheson, 2011. "Taxing Financial Transactions: Issues and Evidence," IMF Working Papers 11/54, International Monetary Fund.
- 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.
- 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.
- Colin Ellis & Simon Price, 2004. "UK Business Investment and the User Cost of Capital," Manchester School, University of Manchester, vol. 72(s1), pages 72-93, 09.
- 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, 06.
- Hau, Harald, 2002. "The Role of Transaction Costs for Financial Volatility: Evidence from the Paris Bourse," CEPR Discussion Papers 3651, C.E.P.R. Discussion Papers.
- Michael Keen, 2011. "Rethinking the Taxation of the Financial Sector ," CESifo Economic Studies, CESifo, vol. 57(1), pages 1-24, March.
- 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.
- Caballero, Ricardo J, 1994. "Small Sample Bias and Adjustment Costs," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 52-58, February.
- 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.
- Wolf Wagner, 2010. "In the Quest of Systemic Externalities: A Review of the Literature ," CESifo Economic Studies, CESifo, vol. 56(1), pages 96-111, March.
- Ruud A. de Mooij, 2011. "The Tax Elasticity of Corporate Debt: A Synthesis of Size and Variations," IMF Working Papers 11/95, International Monetary Fund.
When requesting a correction, please mention this item's handle: RePEc:cpb:discus:202. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.