A General Financial Transaction Tax Motives, Revenues, Feasibility and Effects
WIFO, March 2008
76 Pages Posted: 26 Nov 2010
Date Written: 2008
The issue of whether a tax should be levied on transactions of financial assets (FTT) has been controversial 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?
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