Financial transaction tax

This article is about a tax levied on transactions in the financial sector. For APT Tax--a small tax levied on each transaction in an economy, see Automated Payment Transaction tax.

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A financial transaction tax (FTT) is a levy on a specific type of financial transaction for a particular purpose. The tax has been most commonly associated with the financial sector for transactions involving intangible property rather than real property. It is not usually considered to include consumption taxes paid by consumers.[1]

A transaction tax is levied on specific transactions designated as taxable rather than on any other attributes of financial institutions. If an institution is never a party to a taxable transaction, then no transaction tax will be levied from it.[2] If an institution carries out one such transaction, then it will be levied the tax for the one transaction. This tax is narrower in scope than a financial activities tax (FAT), and is not directly an industry or sector tax like a Financial stability contribution (FSC), or "bank tax",[3] for example. These distinctions are important in discussions about the utility of financial transaction tax as a tool to selectively discourage excessive speculation without discouraging any other activity (as John Maynard Keynes originally envisioned it in 1936).[4]

There are several types of financial transaction taxes. Each has its own purpose. Some have been implemented, while some are only proposals. Concepts are found in various organizations and regions around the world. Some are domestic and meant to be used within one nation; whereas some are multinational.[5] In 2011 there were 40 countries that made use of FTT, together raising $38 billion (€29bn).[6][7]

  1. ^ With the exception, perhaps, of the bank transaction tax which taxes transactions on bank accounts and the Automated Payment Transaction tax which taxes all transactions.
  2. ^ This illustration is attributed to the public lecture of economist Rodney Schmidt, Principal Researcher, The North-South Institute, 20 June 2010, at the "People's Summit", held at Ryerson University in Toronto, Ontario, Canada.
  3. ^ The Canadian Press (24 June 2010). "Flaherty says global bank tax a distraction for G20". CTV news via The Canadian Press. Archived from the original on 31 October 2010. Retrieved 24 June 2010.
  4. ^ Cite error: The named reference Spratt was invoked but never defined (see the help page).
  5. ^ Richard T. Page, "Foolish Revenge or Shrewd Regulation? Financial-Industry Tax Law Reforms Proposed in the Wake of the Financial Crisis?" Archived 16 June 2016 at the Wayback Machine 85 Tul. L. Rev. 191, 193–195, 205–14 (2010).
  6. ^ Cite error: The named reference European voice was invoked but never defined (see the help page).
  7. ^ Stephany Griffith-Jones; Avinash Persaud (February 2012). Financial Transactions Taxes – a report produced for the Committee on Economic and Monetary Affairs (PDF) (Report). Archived (PDF) from the original on 3 July 2012. Retrieved 1 June 2012.