Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/108186
Authors: 
Darvas, Zsolt
von Weizsäcker, Jakob
Year of Publication: 
2010
Series/Report no.: 
IEHAS Discussion Papers MT-DP - 2010/19
Abstract: 
The case for taxing financial transactions merely to raise more revenues from the financial sector is not particularly strong. Better alternatives to tax the financial sector are likely to be available. However, a tax on financial transactions could be justified in order to limit socially undesirable transactions when more direct means of doing so are unavailable for political or practical reasons. Some financial transactions are indeed likely to do more harm than good, especially when they contribute to the systemic risk of the financial system. However, such a financial transaction tax should be very small, much smaller than the negative externalities in question, because it is a blunt instrument that also drives out socially useful transactions. There is a case for taxing over-the-counter derivative transactions at a somewhat higher rate than exchange-based derivative transactions. More targeted remedies to drive out socially undesirable transactions should be sought in parallel, which would allow, after their implementation, to reduce or even phase out financial transaction taxes.
Subjects: 
transaction tax
Tobin tax
financial transactions
global financial crisis
financial regulation
JEL: 
H20
D62
G10
F30
ISBN: 
978-615-5024-10-8
Document Type: 
Working Paper

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