The Fiscal Approach to Financial Intermediation Policy

Patrick Honohan

No WP049, Papers from Economic and Social Research Institute (ESRI)

Abstract: Against the background of increasing financial depth and international financial integration, not least in the EU, the trend towards analyzing financial system policy in fiscal terms is reviewed. Implicit and explicit taxation of the financial system has generated substantial ? though now declining ? fiscal resources. In many countries arbitrary fluctuations in such taxation have accidentally from poorly designed regulatory mechanisms whose primary purpose was not revenue, and which had been set up without regard to the quasi-fiscal consequences. Insights from standard tax analysis help assess the question of efficiency of financial system taxation, though they should not be applied without taking into account the informational and risk-sharing characteristics of financial contracts. The institutional structure of the financial sector can be strongly influenced by conventional taxation.

Pages: 18 pages
Date: 1994-03
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Citations: View citations in EconPapers (9)

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