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BAD Taxation: Disintermediation and Illiquidity in a Bank Account Debits Tax Model

Listed author(s):
  • Pedro Albuquerque

    ()

    (Euromed Marseille - École de management - Association Euromed Management - Marseille, DEFI - Centre de recherche en développement économique et finance internationale - Université de la Méditerranée - Aix-Marseille 2 - Faculté des Sciences Economiques)

This paper uses a dynamic general equilibrium model to study the economic effects of bank account debits (BAD) taxation. Australia and various Latin American countries have levied or levy BAD taxes. Aspects such as financial disintermediation, market illiquidity, and impacts on dividend and interest rates are considered. Part of the BAD tax revenue may be fictitious, due to increased interest payments on government debt. The Brazilian BAD tax (CPMF) experience is evaluated. The empirical analysis confirms some theoretical predictions. Incidence base over GDP appears to be sensitive to the tax rate, possibly engendering a Laffer curve. The tax may also cause real interest rates to increase. Furthermore, the deadweight losses are relatively large, even if revenues are small. The theoretical and empirical results suggest that the BAD tax is not adequate for revenue collection.

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Paper provided by HAL in its series Post-Print with number halshs-00745610.

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Date of creation: Sep 2006
Publication status: Published in International Tax and Public Finance, Springer Verlag, 2006, 13 (5), pp.601-624. <10.1007/s10797-006-6004-9>
Handle: RePEc:hal:journl:halshs-00745610
DOI: 10.1007/s10797-006-6004-9
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00745610
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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