The Rates and Revenue of Bank Transaction Taxes
Jorge Francisco Baca Campodonico
Luiz R. De Mello
Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)
Andrei A. Kirilenko
MIT Sloan School of Management
June 30, 2006
OECD Working Paper, No. 494
This paper provides cross-country empirical evidence on the productivity of bank transaction taxes (BTTs).Our data set comprises six Latin American countries that have levied BTTs since the late 1980s: Argentina, Brazil, Colombia, Ecuador, Peru and Venezuela. We find that, for a given tax rate, revenue declines over time. Therefore, in order to meet a fixed revenue target in real terms, the tax rate needs to be raised repeatedly. However, we also find that successive increases in the tax rate erode the tax base by more than they raise revenue yield and that the higher the increase in the tax rate, the more and faster the tax base is eroded. We conclude that BTTs do not provide a reliable source of revenue, especially over the medium term.
Number of Pages in PDF File: 28
Keywords: Bank transaction tax, bank debit tax, tax productivity
JEL Classification: G28, G29, H21, H22working papers series
Date posted: July 29, 2010
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