Financial Transactions Tax : Panacea, Threat, or Damp Squib?

Attempts to raise a significant percentage of gross domestic product 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 behavior. 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.

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Bibliographic Details
Main Authors: Honohan, Patrick, Yoder, Sean
Language:English
Published: 2010-03-01
Subjects:ADMINISTRATIVE CONTROLS, ADVANCED ECONOMIES, ADVERSE EFFECTS, ADVERSE SELECTION, AMOUNT OF DEBT, ARBITRAGE, ASSET PRICE, ASYMMETRIC INFORMATION, BANK ACCOUNT, BANK PAYMENTS, BANK POLICY, BANKING ASSETS, BANKING MARKET, BANKING SYSTEM, BANKRUPTCY, BASIS POINTS, BOND, BOND MARKET, BONDS, BOURSE, BUSINESS OPPORTUNITY, CAPITAL FLOWS, CASH TRANSACTIONS, CASH WITHDRAWALS, CDS, CENTRAL BANK, CHECKING ACCOUNTS, CHECKS, CORPORATE BORROWERS, CREDIT DEFAULT, CREDIT DEFAULT SWAP, CREDIT DEFAULT SWAPS, CREDIT DERIVATIVES, CREDIT MARKET, CROSS-BORDER CAPITAL, CURRENCY, DEBIT CARD, DEBT, DEBT OBLIGATIONS, DEBT OUTSTANDING, DEFAULT RATES, DEPOSIT, DEPOSITOR, DEPOSITS, DERIVATIVE, DERIVATIVE TRANSACTIONS, DERIVATIVES, DERIVATIVES MARKET, DERIVATIVES MARKETS, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DEVELOPING ECONOMIES, DEVELOPMENT FINANCE, DIVIDEND, E-MONEY, ECONOMIC EFFICIENCY, EQUILIBRIUM BEHAVIOR, EQUILIBRIUM PRICES, EQUITIES, EQUITY MARKET, EXCHANGE RATE, EXCHANGE RATES, EXPENDITURES, FACE VALUE, FINANCE PRODUCTS, FINANCIAL ASSETS, FINANCIAL CRISES, FINANCIAL CRISIS, FINANCIAL DERIVATIVE, FINANCIAL DERIVATIVES, FINANCIAL FLOWS, FINANCIAL INTERMEDIARIES, FINANCIAL MARKET, FINANCIAL MARKET PARTICIPANTS, FINANCIAL MARKETS, FINANCIAL PRODUCTS, FINANCIAL SECTOR, FINANCIAL SECTORS, FINANCIAL STABILITY, FINANCIAL SYSTEM, FINANCIAL TRANSACTION, FINANCIAL TRANSACTIONS, FINANCIAL VOLATILITY, FISCAL DEFICITS, FLOATING RATES, FLOW OF INFORMATION, FOREIGN CURRENCY, FOREIGN EXCHANGE, FOREIGN EXCHANGE MARKET, FOREIGN EXCHANGE MARKETS, FOREIGN EXCHANGE TRANSACTIONS, FUTURES, GLOBAL CLIMATE, GLOBAL FINANCE, GLOBAL FINANCIAL CENTER, GLOBALIZATION, GOVERNMENT EXPENDITURE, GOVERNMENT EXPENDITURES, GOVERNMENT POLICY, GOVERNMENT REVENUE, GROSS DOMESTIC PRODUCT, HOST ECONOMIES, ILLIQUIDITY, INCENTIVE STRUCTURE, INCENTIVE STRUCTURES, INCOME, INCOME TAX, INDUSTRIAL COUNTRIES, INFORMAL ECONOMIES, INFORMATION SYSTEM, INFORMED TRADERS, INNOVATIVE FINANCING, INSTRUMENT, INSURANCE, INSURANCE COMPANY, INTEREST RATE, INTEREST RATE DERIVATIVES, INTEREST RATE FUTURES, INTEREST RATE SWAPS, INTEREST RATES, INTERNATIONAL BANK, INTERNATIONAL DEVELOPMENT, INTERNATIONAL FINANCE, INTERNATIONAL FINANCIAL STATISTICS, INTERNATIONAL SETTLEMENTS, INTERNATIONAL STANDARDS, INTERNATIONAL TRADE, INVENTORY, ISSUANCE, JURISDICTIONS, LEVY, LIQUID MARKET, LIQUIDITY, LOAN, LOCAL CURRENCY, LONG-TERM INTEREST, LONG-TERM INTEREST RATE, MARKET BEHAVIOR, MARKET CONDITIONS, MARKET FAILURE, MARKET FAILURES, MARKET MAKERS, MARKET MANIPULATION, MARKET MANIPULATIONS, MARKET MICROSTRUCTURE, MARKET STRUCTURE, MARKET TRANSACTIONS, MARKET VALUE, MARKET VOLATILITY, MARKET-MAKERS, MATURITY, MICROSTRUCTURE, MONETARY FUND, MONETARY POLICY, MONEY LAUNDERING, MORAL HAZARD, MORTGAGE, MORTGAGE CREDIT, MORTGAGE-BACKED SECURITIES, MORTGAGES, OPTIMAL PORTFOLIO, OUTSTANDING CREDIT, OUTSTANDING STOCK, PAYMENTS SYSTEM, PAYMENTS SYSTEMS, PORTFOLIO, PORTFOLIOS, PREMIUM PAYMENTS, PRICE DISCOVERY, PRICE VOLATILITY, PRIMARY MARKET, PRIVATE SECTOR DEVELOPMENT, PUBLIC FINANCE, RATE OF RETURN, REGULATOR, RESERVE, RESERVE REQUIREMENTS, RETURNS, RISK MANAGEMENT, SALE OF MORTGAGE, SECONDARY MARKET, SECONDARY MARKET TRADING, SECURITIES, SECURITIES MARKET, SECURITIES MARKETS, SECURITIES TRANSACTION, SECURITIES TRANSACTIONS, SETTLEMENT, SETTLEMENT SYSTEMS, SHARE PRICES, SMALL COUNTRIES, SOCIAL COSTS, SOVEREIGN DEBT, STAMP DUTY, STOCK PRICES, STOCK TRADE, STOCKS, SWAP MARKET, TAX, TAX CODE, TAX POLICY, TAX RATE, TAX RATES, TAX RULE, TAX RULES, TAX STRUCTURES, TAX TREATMENT, TRADES, TRADING, TRADING VOLUME, TRANSACTION, TRANSACTION COSTS, TRANSACTIONS COSTS, TRANSFER RISK, TRANSPARENCY, TREASURY, TREASURY BILL, TREASURY BILL RATES, TURNOVER, UNDERLYING ASSETS, UNINFORMED INVESTORS, VALUATION, WHOLESALE FINANCIAL MARKET, WITHDRAWAL,
Online Access:http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100302153508
https://hdl.handle.net/10986/3715
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Summary:Attempts to raise a significant percentage of gross domestic product 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 behavior. 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.