Potential And Risks Of A Financial Transaction Tax
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| Author | : Heribert Diete |
| Publisher | : |
| Total Pages | : 39 |
| Release | : 2010 |
| Genre | : |
| ISBN | : |
In the continuing debate on financial reform, transaction taxes are intensively discussed. Especially comprehensive taxes levied on all financial transactions at a low rate have recently been considered. This paper concludes that the implementation of a financial transaction tax (FTT) of 0.01 percent, levied on all transactions including the trading of shares, bonds, currencies and derivatives, is both advisable and feasible. The application of the transaction tax would have two effects: First, it would reduce the size of the financial sector and eliminate some undesired and socially futile activity. Second, the application of the financial transaction tax would generate revenue of about 250 billion dollars, assuming the tax would be applied globally and the reduction of trading activity would be high. It is often argued that financial transaction taxes can only be implemented globally or not at all. In order to avoid the relocation of financial transactions to non-taxing territories (which may be tax havens or other OECD-countries), this paper suggests that a currency transaction tax, also known as the Tobin tax, should be applied at a rate of one percent by likeminded countries, if a global consensus on the implementation of FTT cannot be achieved. The rationale for the second layer of taxation is not the stabilization of exchange rates, but rather the creation of a mild restriction on capital flows in case the achievement of a global consensus on financial transaction taxes will not be possible.
| Author | : Ms.Thornton Matheson |
| Publisher | : International Monetary Fund |
| Total Pages | : 50 |
| Release | : 2011-03-01 |
| Genre | : Business & Economics |
| ISBN | : 1455220981 |
In reaction to the recent financial crisis, increased attention has recently been given to financial transaction taxes (FTTs) 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 FTT in fulfilling those tasks, on its potential impact, and on key issues to be faced in designing taxes of this kind.
| Author | : Bettina De Souza Guilherme |
| Publisher | : Springer Nature |
| Total Pages | : 372 |
| Release | : 2020-12-09 |
| Genre | : Business & Economics |
| ISBN | : 3030548953 |
This open access book discusses financial crisis management and policy in Europe and Latin America, with a special focus on equity and democracy. Based on a three-year research project by the Jean Monnet Network, this volume takes an interdisciplinary, comparative approach, analyzing both the role and impact of the EU and regional organizations in Latin America on crisis management as well as the consequences of crisis on the process of European integration and on Latin America’s regionalism. The book begins with a theoretical introduction, exploring the effects of the paradigm change on economic policies in Europe and in Latin America and analyzing key systemic aspects of the unsustainability of the present economic system explaining the global crises and their interconnections. The following chapters are divided into sections. The second section explores aspects of regional governance and how the economic and financial crises were managed on a macro level in Europe and Latin America. The third and fourth sections use case studies to drill down to the impact of the crises at the national and regional levels, including the emergence of political polarization and rise in populism in both areas. The last section presents proposals for reform, including the transition from finance capitalism to a sustainable real capitalism in both regions and at the inter-regional level of EU-LAC relations.The volume concludes with an epilogue on financial crises, regionalism, and domestic adjustment by Loukas Tsoukalis, President of the Hellenic Foundation for European and Foreign Policy (ELIAMEP). Written by an international network of academics, practitioners and policy advisors, this volume will be of interest to researchers and students interested in macroeconomics, comparative regionalism, democracy, and financial crisis management as well as politicians, policy advisors, and members of national and regional organizations in the EU and Latin America.
| Author | : El Bachir Boukherouaa |
| Publisher | : International Monetary Fund |
| Total Pages | : 35 |
| Release | : 2021-10-22 |
| Genre | : Business & Economics |
| ISBN | : 1589063953 |
This paper discusses the impact of the rapid adoption of artificial intelligence (AI) and machine learning (ML) in the financial sector. It highlights the benefits these technologies bring in terms of financial deepening and efficiency, while raising concerns about its potential in widening the digital divide between advanced and developing economies. The paper advances the discussion on the impact of this technology by distilling and categorizing the unique risks that it could pose to the integrity and stability of the financial system, policy challenges, and potential regulatory approaches. The evolving nature of this technology and its application in finance means that the full extent of its strengths and weaknesses is yet to be fully understood. Given the risk of unexpected pitfalls, countries will need to strengthen prudential oversight.
| Author | : Serge Wibaut |
| Publisher | : |
| Total Pages | : 21 |
| Release | : 2017 |
| Genre | : |
| ISBN | : |
In the aftermath of the subprime crisis in the U.S. and the sovereign debt crisis in Europe, the opportunity for establishing a financial transaction tax (FTT) has become a topic of debate in the European Union. In this article, we survey the literature dealing with the possible theoretical and empirical implications of such a tax on market volatility. We then turn to the possible -- and unintended -- consequences of an FTT on savers and investors. We conclude that these consequences might outweigh the benefits of the FTT. More specifically, we find that an FTT is unlikely to meet its stated volatility control and revenue raising objectives, i.e., an FTT is unlikely to decrease volatility, and indeed, volatility might increase as markets became less liquid. It might raise very little revenue and could work to create more risk and deter long term investment.And then there are serious unintended side effects to consider. Most importantly, for the financial security and safety of the whole financial system, an FTT might heavily penalize pension funds, as well as the banks in their liquidity management and risk management activities, to the detriment of a well-functioning financial system.
| Author | : Mr.Parthasarathi Shome |
| Publisher | : International Monetary Fund |
| Total Pages | : 21 |
| Release | : 1995-08-01 |
| Genre | : Business & Economics |
| ISBN | : 1451849958 |
Financial transactions taxes have recently gained attention as a possible means to influence the behavior of financial markets and to reduce destabilizing capital flows. One variation is a tax on all foreign currency conversions, often termed a “Tobin tax.” This paper suggests that these taxes would probably not produce the desired effects and would be difficult to design and implement. It is unclear that the possible advantages in reducing some short-term speculative trading would outweigh the possible disadvantages in impairing the efficiency of financial markets. From an administrative perspective, without a broad international consensus and application, these taxes are likely to be easily avoided.
| Author | : John C. Bogle |
| Publisher | : John Wiley & Sons |
| Total Pages | : 391 |
| Release | : 2012-07-05 |
| Genre | : Business & Economics |
| ISBN | : 1118238214 |
Recommended Reading by Warren Buffet in his March 2013 Letter to Shareholders How speculation has come to dominate investment—a hard-hitting look from the creator of the first index fund. Over the course of his sixty-year career in the mutual fund industry, Vanguard Group founder John C. Bogle has witnessed a massive shift in the culture of the financial sector. The prudent, value-adding culture of long-term investment has been crowded out by an aggressive, value-destroying culture of short-term speculation. Mr. Bogle has not been merely an eye-witness to these changes, but one of the financial sector’s most active participants. In The Clash of the Cultures, he urges a return to the common sense principles of long-term investing. Provocative and refreshingly candid, this book discusses Mr. Bogle's views on the changing culture in the mutual fund industry, how speculation has invaded our national retirement system, the failure of our institutional money managers to effectively participate in corporate governance, and the need for a federal standard of fiduciary duty. Mr. Bogle recounts the history of the index mutual fund, how he created it, and how exchange-traded index funds have altered its original concept of long-term investing. He also presents a first-hand history of Wellington Fund, a real-world case study on the success of investment and the failure of speculation. The book concludes with ten simple rules that will help investors meet their financial goals. Here, he presents a common sense strategy that "may not be the best strategy ever devised. But the number of strategies that are worse is infinite." The Clash of the Cultures: Investment vs. Speculation completes the trilogy of best-selling books, beginning with Bogle on Investing: The First 50 Years (2001) and Don't Count on It! (2011)
| Author | : [Anonymus AC08741538] |
| Publisher | : |
| Total Pages | : 44 |
| Release | : 2010 |
| Genre | : |
| ISBN | : 9789279187353 |
"The global economic and financial crisis has created important needs for fiscal consolidation. This document analyses potential instruments to raise additional tax revenues from the financial sector. The first section reviews the current policy objectives related to the taxation of the financial sector. The second section sheds some light on the current tax treatment of the financial sector. The third section discusses potential tax instruments to reach the goals. The fourth and fifth section respectively assess the advantages and drawbacks of a Financial Transaction Tax and a Financial Activities Tax."--Editor.
| Author | : International Monetary Fund. Fiscal Affairs Dept. |
| Publisher | : International Monetary Fund |
| Total Pages | : 41 |
| Release | : 2009-12-06 |
| Genre | : Business & Economics |
| ISBN | : 1498335926 |
Tax distortions are likely to have encouraged excessive leveraging and other financial market problems evident in the crisis. These effects have been little explored, but are potentially macro-relevant. Taxation can result, for example, in a net subsidy to borrowing of hundreds of basis points, raising debt-equity ratios and vulnerabilities from capital inflows. This paper reviews key channels by which tax distortions can significantly affect financial markets, drawing implications for tax design once the crisis has passed.
| Author | : Mr.P. Bernd Spahn |
| Publisher | : International Monetary Fund |
| Total Pages | : 62 |
| Release | : 1995-06-01 |
| Genre | : Business & Economics |
| ISBN | : 1451847998 |
Tobin has suggested that exchange rate volatility be controlled through a tax on international financial transactions. This analysis shows that the Tobin tax as a pure transaction tax is not viable. The tax would impair financial operations and create international liquidity problems. It is also unlikely to deter speculation. However, a possible alternative would be a two-tier rate structure—consisting of a low-rate transaction tax plus an exchange surcharge. The exchange rate could move freely within a “crawling” exchange rate band, but overshooting the band would trigger a tax on an “externality,” which is the discrepancy between the market exchange rate and the closest margin of the band. The scheme is inspired by the European Monetary System. However, exchange rates would be kept within the target range through a tax, not through interest policy or central bank sterilization and, eventually, the depletion of international reserves.
