The Rationale for a Financial Transaction Tax
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This briefing specifically highlights the benefits of a Financial Transaction Tax (FTT). The FTT is viewed as the most suitable instrument to help to achieve two objectives: (i) stabilize the markets and (ii) raise funds for domestic fiscal consolidation as well as global challenges such as climate change and poverty eradication. The study suggests that all types of financial transactions should have their trade taxed, which would help curtail particularly short term transactions. One-off transactions, for example for hedging purposes in the real economy, will however hardly be affected. Another advantage of a broad tax base is the fact that already a very small tax rate could yield high revenues which could be linked to international commitments such as poverty reduction and international climate financing.
Article number: 2010-21
Year of publication: 2010
Number of pages: 32 pages
Author: Irene Knoke