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Implementation of a General Financial Transactions Tax

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  • Stephan Schulmeister

Abstract

The study summarises the most significant observations about trading behaviour and price dynamics in financial markets. Against this background, the main objections to a general financial transactions tax (FTT) as put forward by the International Monetary Fund and the European Commission are evaluated. The main part of the study deals with the two different ways of how an FTT could be implemented. With the centralised approach, the tax is collected at point of settlement, either from the electronic settlement systems at exchanges, or from Central Counterparty Platforms (CCPs) in the case of over-the-counter (OTC) transactions, respectively. With the decentralised approach, the tax is deducted by the banks which transmit an order to an exchange or which carry out an OTC transaction. The centralised tax deduction would be optimal but requires a broad consensus among countries within the same trading time zone. By contrast, the decentralised approach could be implemented by a group of (EU or euro) countries without doing much harm to their own markets.

Suggested Citation

  • Stephan Schulmeister, 2011. "Implementation of a General Financial Transactions Tax," WIFO Studies, WIFO, number 41992, January.
    • Handle: RePEc:wfo:wstudy:41992
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    References listed on IDEAS

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    1. James Tobin, 1978. "A Proposal for International Monetary Reform," Eastern Economic Journal, Eastern Economic Association, vol. 4(3-4), pages 153-159, Jul/Oct.
    2. Dean Baker, 2011. "The Deficit-Reducing Potential of a Financial Speculation Tax," CEPR Reports and Issue Briefs 2011-02, Center for Economic and Policy Research (CEPR).
    3. Schulmeister, Stephan, 2006. "The interaction between technical currency trading and exchange rate fluctuations," Finance Research Letters, Elsevier, vol. 3(3), pages 212-233, September.
    4. European Commission, 2010. "Financial Sector Taxation," Taxation Papers 25, Directorate General Taxation and Customs Union, European Commission.
    5. Stephan Schulmeister, 2009. "Technical Trading and Trends in the Dollar-Euro Exchange Rate," WIFO Studies, WIFO, number 37582, January.
    6. Stephan Schulmeister, 2009. "Trading Practices and Price Dynamics in Commodity Markets and the Stabilising Effects of a Transaction Tax," WIFO Studies, WIFO, number 34919, January.
    7. Schulmeister, Stephan, 2009. "Profitability of technical stock trading: Has it moved from daily to intraday data?," Review of Financial Economics, Elsevier, vol. 18(4), pages 190-201, October.
    8. Helene Schuberth & Stephan Schulmeister, 2011. "Settlement Systems and Financial Transactions Taxes," WIFO Studies, WIFO, number 42610.
    9. Zsolt Darvas & Jakob Weizsäcker, 2011. "Financial transaction tax: Small is beautiful," Society and Economy, Akadémiai Kiadó, Hungary, vol. 33(3), pages 449-473, December.
    10. Menkhoff, Lukas, 2010. "The use of technical analysis by fund managers: International evidence," Journal of Banking & Finance, Elsevier, vol. 34(11), pages 2573-2586, November.
    11. Dean Baker & Robert Pollin & Travis McArthur & Matt Sherman, 2009. "The Potential Revenue from Financial Transactions Taxes," CEPR Reports and Issue Briefs 2009-50, Center for Economic and Policy Research (CEPR).
    12. Lukas Menkhoff & Mark P. Taylor, 2007. "The Obstinate Passion of Foreign Exchange Professionals: Technical Analysis," Journal of Economic Literature, American Economic Association, vol. 45(4), pages 936-972, December.
    13. European Commission, 2010. "Innovative Financing at a Global Level," Taxation Papers 23, Directorate General Taxation and Customs Union, European Commission.
    14. Stephan Schulmeister & Margit Schratzenstaller-Altzinger & Oliver Picek, 2008. "A General Financial Transaction Tax. Motives, Revenues, Feasibility and Effects," WIFO Studies, WIFO, number 31819.
    15. Stephan Schulmeister, 2010. "Boom-Bust Cycles and Trading Practices in Asset Markets, the Real Economy and the Effects of a Financial Transactions Tax," WIFO Working Papers 364, WIFO.
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    Citations

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    Cited by:

    1. Stephan Schulmeister, 2014. "A General Financial Transactions Tax. Motives, Effects and Implementation According to the Proposal of the European Commission," WIFO Working Papers 461, WIFO.
    2. Stephan Schulmeister, 2015. "The struggle over the Financial Transactions Tax. A politico-economic farce," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(5), pages 15-55.
    3. Veronika Solilová & Danuše Nerudová & Marian Dobranschi, 2017. "Sustainability-oriented future EU funding: a financial transaction tax," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 44(4), pages 687-731, November.
    4. Atanas Pekanov & Margit Schratzenstaller-Altzinger, 2018. "Evaluating the Revenues from a Financial Transaction Tax in 10 EU Member States through Enhanced Cooperation," WIFO Studies, WIFO, number 62043, January.
    5. Dorothea Schäfer, 2012. "Financial Transaction Tax Contributes to More Sustainability in Financial Markets," Discussion Papers of DIW Berlin 1198, DIW Berlin, German Institute for Economic Research.
    6. John Grahl & Photis Lysandrou, 2014. "The European Commission's Proposal for a Financial Transactions Tax: A Critical Assessment," Journal of Common Market Studies, Wiley Blackwell, vol. 52(2), pages 234-249, March.
    7. Karl Aiginger, 2012. "85 Jahre WIFO: Gedanken zu Geschichte und Zukunft des Institutes," WIFO Monatsberichte (monthly reports), WIFO, vol. 85(6), pages 497-510, June.
    8. Dorothea Schäfer & Marlene Karl, 2012. "Finanztransaktionssteuer: ökonomische und fiskalische Effekte der Einführung einer Finanztransaktionssteuer für Deutschland; Forschungsprojekt im Auftrag der SPD-Fraktion im Bundestag," DIW Berlin: Politikberatung kompakt, DIW Berlin, German Institute for Economic Research, volume 64, number pbk64, April.
    9. Stephan Schulmeister & Eva Sokoll, 2013. "Implementation of a Financial Transaction Tax by a Group of EU Member States. Estimation of Relocation Effects, of the Size and Distribution of Revenues and of the First-mover Advantage of the Partici," WIFO Studies, WIFO, number 46864, January.
    10. Atanas Pekanov & Margit Schratzenstaller-Altzinger, 2019. "A Global Financial Transaction Tax. Theory, Practice and Potential Revenues," WIFO Working Papers 582, WIFO.
    11. Helene Schuberth & Stephan Schulmeister, 2011. "Settlement Systems and Financial Transactions Taxes," WIFO Studies, WIFO, number 42610.
    12. FitzGerald, John & Central Bank Staff, 2012. "The EU Financial Transactions Tax Proposal: A Preliminary Evaluation," Research Series, Economic and Social Research Institute (ESRI), number BKMNEXT217.

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