Abstract
A
Financial Transaction Tax (FTT) compares to a value-added tax on financial
transactions and financial services. This differs from the financial activity
tax (FAT) that is raised on profits of financial companies or on profit-related
remuneration of financial managers. An FTT is neither necessarily related to a
certain kind of financial transaction or service, nor does it have a clear
assessment base or a certain tax rate. These are decisions to be made during
political discourse.
Taxes, also an
FTT, have the potential to reduce trading volumes. This can even lead to a
closing down of markets that operated on small margins that can be devoured by
an FTT. If such markets fulfill the economic assumptions of perfect
competition, an FTT should be rejected by economic reasons.
The fiscal aspect of an FTT depends
on the participating countries, the assessment base and the tax rate. The
European Union hasn’t been able to design an EU-wide FTT; not even the complete
Eurozone has agreed on an FTT so that ten countries are currently negotiating
the project in an in-depth cooperation. The assessment base has already eroded,
starting with shares, bonds and derivative products right after the world
financial crisis, reaching a minimum compromise with only shares as an
assessment base for the FTT. Negotiations are still ongoing so that even some
exceptions from this assessment might be possible.
Experience has shown that an FTT
leads to evasive reactions. Sweden and France know very well about that, and
that might be a reason why Sweden does not participate in the in-depth
cooperation. The cooperation still lacks a decision about the tax rate, they
still have to negotiate about the distribution of the tax revenues, as the smaller
countries within the in-depth cooperation fear that the bureaucratic cost of an
FTT might exceed their proceeds from this project.
The successful implementation of an
FTT – even only within the ten countries of the in-depth cooperation – seems
doubtful.
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