The Rates and Revenue of Bank Transaction Taxes

28 Pages Posted: 29 Jul 2010

Date Written: June 30, 2006

Abstract

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.

Keywords: Bank transaction tax, bank debit tax, tax productivity

JEL Classification: G28, G29, H21, H22

Suggested Citation

Baca Campodonico, Jorge Francisco and de Mello, Luiz R. and Kirilenko, Andrei A., The Rates and Revenue of Bank Transaction Taxes (June 30, 2006). OECD Working Paper, No. 494. Available at SSRN: https://ssrn.com/abstract=1650372 or http://dx.doi.org/10.2139/ssrn.1650372

Jorge Francisco Baca Campodonico (Contact Author)

PREDICEPERU ( email )

Calle Los Artesanos 221 Dpto. 201
Urb. Las Gardenias Surco
Lima
Peru
51-1-3726876 (Phone)

HOME PAGE: http://www.prediceperu.com

Luiz R. De Mello

OECD ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France
+33-1-45.24.87.52 (Phone)

Andrei A. Kirilenko

University of Cambridge - Finance ( email )

Cambridge
United Kingdom

HOME PAGE: http://https://www.jbs.cam.ac.uk/faculty-research/faculty-a-z/andrei-kirilenko/

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