Financial Transactions Taxes

Janet Stotsky and Parthasarathi Shome

No 1995/077, IMF Working Papers from International Monetary Fund

Abstract: Financial transactions taxes have recently gained attention as a possible means to influence the behavior of financial markets and to reduce destabilizing capital flows. One variation is a tax on all foreign currency conversions, often termed a “Tobin tax.” This paper suggests that these taxes would probably not produce the desired effects and would be difficult to design and implement. It is unclear that the possible advantages in reducing some short-term speculative trading would outweigh the possible disadvantages in impairing the efficiency of financial markets. From an administrative perspective, without a broad international consensus and application, these taxes are likely to be easily avoided.

Keywords: WP; market; capital gains tax; financial instrument; financial asset; market efficiency; cost of capital; futures contract; financial market participant; market volatility; cash market; Financial transaction tax; Transaction tax; Currencies; Capital flows; Stock markets; East Asia; South Asia; Global (search for similar items in EconPapers)
Pages: 20
Date: 1995-08-01
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Citations: View citations in EconPapers (9)

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