Financial Transaction Taxes- high level summary of tax options

Published 25/03/2013

This paper, produced by the IRSG's Financial Sector Taxation Working Group, compares some of the key design features of UK Stamp Duty Reserve Tax, French FTT, Italian FTT, Swedish FTT, Swiss Stamp Duty and the proposed EU11 FTT.

The key conclusions of this analysis are:

  • The availability of substitutes and the ability to migrate activity offshore will have a large impact on the success of the tax, both in terms of revenue-raising and impact on the market.
  • None of the taxes raise significant sums of revenue, even in the UK and Switzerland with their large concentration of financial services.
  • Broad exemptions for intermediaries are a key feature of the UK and Swiss models, assisting market efficiency and avoiding cascading effects.
  • The FTT would reduce market liquidity in all securities markets. Medium size countries such as Spain are expecting their securities markets volumes to shrink up to 85% in a similar fashion to the Swedish experience.
  • In particular, significant decrease in turnover of fixed income and derivatives were experienced even with very low tax rates. Progressive tax rates depending on maturity in fixed income could alleviate this to some extent.
  • An automated collection system, as in the UK, reduces administrative burdens on both the revenue authorities and the industry. It also makes thetax harder to avoid.
  • Difficulty enforcing the tax overseas is key issue with all of these taxes given the global nature of financial markets.

Other reports on FTT:

A Financial Transaction Tax - review of impact assessments

Implications of a Financial Transaction Tax for the European regulatory reform agenda

The effects of a financial transaction tax on European households' savings

The impact of a Financial Transaction Tax on corporate and sovereign debt