Financial Transactions Tax: Panacea, Threat or Damp Squib?

Abstract

Attempts to raise a significant percentage of GDP in revenue from a broad-based financial transactions tax are likely to fail both by raising much less revenue than expected and by generating far-reaching changes in economic behaviour. Although the side-effects would include a sizable restructuring of financial sector activity, this would not occur in ways corrective of the particular forms of financial overtrading that were most conspicuous in contributing to the crisis.

Keywords: Transaction Tax, Tobin Tax

JEL Classification: H27, H25, O29