Documents
IMF Working Paper Taxing Financial Transactions: An Assessment of Administrative Feasibility
Prepared by John D. Brondolo, Published by the IMF in August 2011. Please click here to access the IMF working paper.
This paper considers how a tax on financial transactions could be applied to three broad and partially overlapping categories of financial instruments: (1) exchange-traded instruments;
(2) over-the-counter instruments; and, (3) foreign exchange instruments. For each category, the paper examines the factors that would facilitate or complicate the administration of a financial transactions tax, the options for collecting the tax, the types of compliance risks that are likely to be encountered, and measures for mitigating these risks.
TOWARDS A FINANCIAL TRANSACTIONS TAX : The case for feasibility
A short note on the feasability of an financial transaction tax.
A revenue package for the European Union
In this study, Remi Bazillier, assistant professor at the University of Orleans, deals with the revenue package for the EU. Please click here to access the study.
"In order to pull their economies out of recession, European governments had to massively increase public spending, in addition to the budgetary impact of automatic stabilisers. In-stead of compensating this spending with excessive austerity, necessary fiscal consolidation should be partly achieved via a European-wide budget revenue package. This should include new progress in tax coordination (including a common corporate tax base), a European (and preferably global) financial transactions tax, a common and effective European strategy against tax fraud with annual national targets, an EU-led initiative at global level (G20 and OECD) to step up the fight against tax havens within a clear timeframe, and an EU-wide CO2 tax. Such a package should also help to shift some of the tax burden on labour to other sources".
Financial Transaction Tax: an idea whose time has come
In a new policy paper TUAC argues in favour of a Financial Transaction Tax (FTT)
in the context of enormous OECD country public resource gaps created by the financial crisis, on the one hand, and significant government commitments for financing development and climate change mitigation and adaptation measures on the other.
The economic justification for an FTT starts with the acknowledgement of the harmful effects of short-term speculation producing speculative bubbles over the long run. A measured and controlled increase in transaction costs implied by an FTT would slow down trading activities so as to align capital flows with economic fundamentals, while freeing up new sources of financing for governments.
As a result of the global crisis government deficits have reached unprecedented levels. The size of fiscal consolidation recommended by the OECD will place severe budget constraints on governments. And yet these same governments have still to deliver on their commitments to finance global public goods, including raising Official Development Assistance to 0.7% of Gross National Income and climate change adaptation and mitigation measures for developing countries. The global public good resource gap that would emerge would be in the range of $324-336bn per year between 2012 and 2017 ($156bn for climate change, $168-180bn for ODA).
Reviewing research published in 2009, the TUAC paper shows that an FTT could be designed with different rates for each counterparty (regulated banks, other financial institutions & private capital, non-financial corporations) and for different transactions (‘traditional’ foreign exchange markets, exchange-traded derivatives, over-the-counter (OTC) derivatives). Such a multi-tiered system would target markets and operators that are more prone to speculative trading than others. It would be large enough to wipe out short-term speculative trading, but not so large as to hamper normal functioning of markets.
At the G20 Summit in Pittsburgh in September 2009, Heads of states called on the IMF to undertake research to determine a “fair and substantial contribution” that the financial sector could make to pay “for any burdens associated with government interventions to repair the banking system”. The IMF has argued for the creation of a “global banking insurance scheme” as an alternative to an FTT, to which the Fund has been opposed. The TUAC Paper – which has been submitted on behalf of the Global Unions to the IMF – argues that an FTT, unlike the insurance proposal, would provide governments with a powerful regulatory tool which would not depend on the ability of the supervisory authorities to price or assess risk.
Financial Transaction Taxes: Necessary, Feasible and Desirable (FEPS, Feb. 2010)
This conference paper lays the context in which the discussion on financial transaction taxes is taking place. The world has been rocked by the most major financial and economic crisis in recent history. This crisis has exposed several aspects of financial market dysfunction which not only increase the instability of the markets but also impede their normal functioning as tools to allocate economic resources throughout the economy.
Europeans for Financial Reform response to the IMF consultation on Financial Sector Taxation (FEPS & GPF, January 2010)
Table of contents:
- Rationale for a financial transaction tax?
- The functioning of a financial transaction tax
- How much would a global financial transaction raise?
- A step-wise approach
- Counter-arguments: addressing speculators’ behaviours
- Technical feasibility
- Summing up
Briefing note by the TUAC Secretariat for the 123rd Plenary Session in Paris, 12 November 2009
The TUAC Paper compares the proposal by James Tobin and the views of the IMF and OECD before outlining the Short term trading and the risk of speculative bubbles aspects. The conclusions describes the state of discussion in 2009.
Financial Transaction Taxes - The taxes of the future (FEPS, Sept. 2009)
As a former study by the FEPS foundation had put it, these factors have led to a renewed interest in the Tobin Tax as well as the broader family of Financial Transaction Taxes. Rather unexpectedly, the chief UK regulator recently expressed support for a worldwide Tobin Tax to curb the size of the financial sector. Financial transaction taxes have also been talked about recently as a way of increasing revenue from the financial sector to ‘make it pay for its rescue’. Another attraction is the potential positive impact these taxes might have on stabilizing financial markets by skewing incentives towards long term investments and away from short term speculation. You can download the FEPS Study hereunder.
A General Financial Transaction Tax: Motives, Revenues, Feasibility and Effects (Wifo, March 2008)
In March 2008, the Austrian WIFO Institute published a major study on the financial transaction tax. The issue of whether a tax should be levied on transactions of financial assets (FTT) has beencontroversial ever since it was proposed by Keynes (1936). The debate turns on the answers to three questions. First, is there excessive trading in financial markets which causes exchange rates, stock prices, and commodities prices to fluctuate excessively over the short run as well as over the long run? Second, would a small tax on financial transactions hamper destabilizing speculation without reducing liquidity beyond the level needed for market efficiency? Third, will the revenues of a general FTT even at a low tax rate be substantial relative to the costs of its implementation?