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The Tobin Tax A Review of the Evidence

Author

Listed:
  • Neil McCulloch

    (Institute of Development Studies (IDS), University of Sussex)

  • Grazia Pacillo

    (Department of Economics, University of Sussex)

Abstract

The debate about the Tobin Tax, and other financial transaction taxes (FTT), gives rise to strong views both for and against. Unfortunately, little of this debate is based on the now considerable body of evidence about the impact of such taxes. This review attempts to synthesise what we know from the available theoretical and empirical literature about the impact of FTTs on volatility in financial markets. We also review the literature on how a Tobin Tax might be implemented, the amount of revenue that it might realistically produce, and the likely incidence of the tax. We conclude that, contrary to what is often assumed, a Tobin Tax is feasible and, if appropriately designed, could make a significant contribution to revenue without causing major distortions. However, it would be unlikely to reduce market volatility and could even increase it.

Suggested Citation

  • Neil McCulloch & Grazia Pacillo, 2010. "The Tobin Tax A Review of the Evidence," Working Paper Series 1611, Department of Economics, University of Sussex Business School.
    • Handle: RePEc:sus:susewp:1611
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    More about this item

    Keywords

    Tobin tax; financial transaction taxes; volatility; revenue; incidence; feasibility;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H27 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other Sources of Revenue

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